Nexus Blue Strategy FINAL 1-11-16 Fishery Philippines

INVESTING
FOR
SUSTAINABLE
GLOBAL FISHERIES
With support from:

Bloomberg Philanthropies
Vibrant Oceans Initiative
The Rockefeller Foundation
Executive Summary
Introduction
Small-Scale Fisheries
Investment Blueprints
The Mariscos Strategy
The Mangue Strategy
The Isda Strategy
Industrial-Scale Fisheries
Investment Blueprints
The Merluza Strategy
The Sapo Strategy
National-Scale Fisheries
Investment Blueprint
The Nexus Blue Strategy
ENCOURAGE CAPITAL PUBLICATION DISCLAIMER
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THE NATIONAL-SCALE FISHERIES INVESTMENT THESIS
T he National Scale Fisheries Strategy employs a public-private partnership (PPP) model to finance,
develop, implement, and operate the targeted infrastructure and services to address critical information
gaps. Through a PPP model, private partners with sector expertise can develop and operate information
and enforcement infrastructure, such as vessel monitoring systems (VMS) and electronic catch accounting,
which the public sector has in many cases struggled to deliver. This data in turn can catalyze the system-
wide management reforms required across the supply chain in order to protect and restore seafood
resources, and offers transparency to end buyers in order to ensure that market actors as well as authorities
are able to punish violators while recognizing and rewarding best practices.
These solutions are directly focused on removing key barriers to effective fisheries management at the
public-sector level in order to optimize the existing resources and capabilities of governments and regional
fisheries management authorities (RFMOs). The national-scale strategy looks to the key leverage points in
the supply chain system where relatively small, targeted investments in infrastructure can yield significant
benefits for fisheries regulators, and in turn, offer meaningful positive social and environmental impacts.
However, these public infrastructure, management, and social benefits are not easily monetized through
traditional, private investment models, which in turn can deter innovative, entrepreneurial, market-based
solutions. Fortunately, there is a successful precedent investment structure employed across the world
to attract private capital, innovation, and operating expertise to public assets and services, such as mass
transit, that would otherwise not be commercially investible. That structure is the public-private partnership,
also referred to as PPP or P3 investments (for those not familiar with the PPP framework, please refer to
Annex C for more detail). The National-Scale Fisheries Strategy proposes adapting the PPP framework to
fisheries management interventions, specifically through bundled investments in two categories:
1. Comprehensive fisheries information By bundling a FIMS data management investment
management systems (FIMS) packages together with an infrastructure and operating PPP,
including shore-based and on-the-water tools we have identified a revenue stream to support
such as monitoring, control, and surveillance the public good provided by information access
(MCS) systems, traceability systems, and and transparency. In the case of a port, port user
electronic catch accounting; fees and ancillary services generate revenue at a
natural monopoly in the supply chain, providing
2. The assets and operations of brick and mortar revenue streams necessary to structure an
fishing port infrastructure at key landing and attractive investment.
market access points.
NATIONAL-SCALE FISHERY CHALLENGES

The Encourage Capital team evaluated numerous complex, and making the management of highly
cases of fisheries with well-intentioned regulators migratory, border-crossing fish stocks like tuna
and a robust framework on paper. Yet these especially difficult. The result of this difficulty
fisheries suffer from a lack of infrastructure, data, is the growth of IUU fishing, which threatens
institutional capacity, and political will to empower to undermine the efforts of the best-formed
management authorities to deliver on regulatory management policies, puts excessive pressure on
enforcement and other public commitments. resources, enables human rights abuses such as
In many cases, these infrastructure, data, slave labor, and punishes compliant fishers who face
governance and institutional capacity deficiencies declining catch volumes despite following the letter
are a fundamental barrier to implementing of the law.
fisheries management policies at the national
or supranational-scale. These barriers distort Ultimately, information asymmetry lies at the heart
market incentives and are at the root cause of of IUU fishing in many national and supranational
illegal, unregulated, and unreported (IUU) fishing. fisheries. A lack of data and transparency prevents
Ineffective governance infrastructure prevents authorities, seafood buyers, and other well-
effective legal enforcement of regulations of any intentioned stakeholders to access timely data on
sort. The result is a persistent governance gap who is fishing illegally, where they are fishing, how
across the worlds oceans, with an especially much they are catching, and where that product
pernicious effect in emerging market regions with is being sold. Greater control of information offers
large maritime resources, such as Southeast Asia. significant potential to tip this system in a positive
direction, for which the growth in low-cost data
At the supranational level, which involves collection and analytics technologies, and the
cooperation between national authorities, the ubiquitous big data trend, offer particularly
challenge becomes even more pervasive and promising solutions.
TABLE OF CONTENTS
The Nexus Blue Strategy: A National-Scale Fisheries Investment in the Philippines 1

The Nexus Blue Strategy 2
Key Value Drivers 3
Profile of the Nexus Blue Strategy Fishery 4

Stock Profile and Current Status 5
WCPFC Stock Status 7
The Philippines Role in the WCPO 10
Stock Status and Threats within Philippines Waters 11
Stock Management Approach and Challenges 12
Regional Regulatory Context for Highly Migratory Stocks 12
Philippine National Fisheries Regulatory Context 12
The Principal of Total Allowable Catch 13
Fisheries Management Challenges 13
Governance Challenges 13
Illegal, Unreported, and Unregulated (IUU) Fishing Activity 14
Threat of European Commission Trade Sanctions and the Yellow Card 14
The Philippines Amended Fisheries Law of 2015 15
Ongoing Challenges 15
General Santos Fish Port Complex 16

Current Supply Chain and FIsh Port Throughput 16
Harvest Logistics 20
Export Destinations 21
Port Infrastructure and Challenges 21
Harbor Basins 22
Wharfs 22
Cold Storage 22
Port Governance Structure 23
Threats to Port Viability 24
Threats to Port Economic Model 24
Current Fisheries Data Collection and Management Deficiencies 25
Socioeconomic Context 26
The Nexus Blue Impact Strategy 27

Impact Investment Thesis 27
Targeted Social and Environmental Impacts 28
Step 1: The Fishery Information Management System (FIMS) 29
Fisheries Management Information System Budget 32
Step 2: Port Refurbishment and Operations 34
Fisheries Port PPP Features 35
General Santos Port Infrastructure and Operations Budget 36
TABLE OF CONTENTS (continued)
The Nexus Blue Strategy Financial Assumptions and Drivers 37

Revenues 37
Operating Expenses 38
Balance Sheet Assumptions 39
The Nexus Blue Transaction Structure 40

Sources and Uses of Funds 40
Structure and Governance 41
Analysis of Financial Returns 42

Summary of Returns 43
Sensitivity Analysis 44
Nexus Blue Risks and Mitigants 45
Appendix 47
Annex A: The Public-Private Partnership Framework 48

Definition 48
PPP Revenue Models 49
Availability Payments 49
Concessions 49
Project Development 49
PPP Project Characteristics 50
PPP Stakeholders 50
PPP Investor Landscape 51
Annex B: Public-Private Partnerships in the Philippines 52

Philippines Precedent Projects and Track Record 52
PPP Route Options and Comparisons 52
Annex C: Proposed Investment Design Methodology for Fisheries PPPs 55

The PPP Investment Blueprint Development Process 55
Project Scoping Exercise 55
Pre-Feasibility Study 56
Project Constraints 57
Adhere to the Philippines PPP Regulations and Project Financing Requirements 57
Deliver a Compelling Value Proposition to Critical Stakeholders 57
Be ScalabLe and Replicable in Order to Achieve Ecosystem-Wide Impact 57
Annex D: The National-Scale Fisheries Investment Profile 58

Core Value Drivers 58
Risks to Consider 58
Structure and Terms 58
FIGURES
FIGURE 1: Philippines Fisheries Snapshot 4
FIGURE 2: The Tuna Highway and WCPFC Statistical Area 6
FIGURE 3: WCPFC Tuna Species Landed in the Philippines 6
FIGURE 4: WCPFC Billfish Species Landed in the Philippines 7
FIGURE 5: Relative Size of the WCPFC Tuna Fisheries 7
FIGURE 6: The Status of Key Tuna Stocks in the WCPO 8
FIGURE 7: Time Series of Commercial Tuna Species Spawning Biomass in the WCPFC 9
FIGURE 8: Stock Status of Selected Global Tuna Fisheries as of 2014 9
FIGURE 9: Classification of Philippine Registered Commercial Vessels of the WCPFC 10
FIGURE 10: Trend of Catch Per Unit Effort for Municipal Small Pelagic Fisheries
in the Philippines Since 1948 11
FIGURE 11: Fisheries Governance Index 13
FIGURE 12: EIU 2015 Coastal Governance Index - Living Resources Category Rankings 14
FIGURE 13: Map of the Philippines and General Santos City 16
FIGURE 14: Current Supply Chain at the General Santos Fish Port Complex 18
FIGURE 15: Throughput by Market Location at the General Santos Fish Port Complex (20042014) 19
FIGURE 16: Catch Per Unit Effort for Purse Seiners Landing at GenSan (20062011) 19
FIGURE 17: Frozen Fish Landings into General Santos (20042014) 20
FIGURE 18: On-the-Water Logistics and Transport 21
FIGURE 19: General Santos Fish Port Current Facilities 22
FIGURE 20: Comparison Between Municipal and Industrial Sectors 26
FIGURE 21: The Nexus Blue Strategys Investments 28
FIGURE 22: Components of a comprehensive FIMS PPP component under the Nexus Blue strategy 29
FIGURE 23: Vessel-Based Electronic Monitoring (VMS) and Electronic Reporting (eLog) 31
FIGURE 24: Port-Based Electronic Catch Accounting and Data Management 32
FIGURE 25: FIMS Capex Budget by Category 33
FIGURE 26: FIMS Total Operating Expense Contribution Over the Project Life 33
FIGURES (continued)
FIGURE 27: Capital Expenditures and Operating Expenses Over the Projects 35-Year Life 34
FIGURE 28: Key Features of the Fishing Port Infrastructure Components of the PPP 35
FIGURE 29: Port Infrastructure Capital Expenditures 36
FIGURE 30: PortCo Capital Expenditures and Operating Expenses Over Project Life 36
FIGURE 31: NexusCo Revenues by Category Over 33-Year Project Life 38
FIGURE 32: NexusCo Overall Operating Expenses and Capital Expenditure Over 33-Year Project Life 39
FIGURE 33: Operating Expenses and Revenues Over Nexus Blue Project Period 39
FIGURE 34: Sources and Uses of Funds 40
FIGURE 35: Nexus Blue Public-Private Partnership Transaction Structure 41
FIGURE 36: Summary of Returns 43
FIGURE 37: The Public-Private Partnership Spectrum 48
FIGURE 38: Indicative PPP Project Development Cycle 50
FIGURE 39: Pros and Cons of the Three PPP Pathway Options 53
FIGURE 40: The Five Steps Undertaken During the Project Scoping Exercise 55
FIGURE 41: The Seven Steps Undertaken During the Pre-Feasibility Study 56
FIGURE 42: Indicative Public-Private Partnership Transaction Structure 59

THE NEXUS BLUE STRATEGY:
A NATIONAL-SCALE FISHERIES INVESTMENT IN THE PHILIPPINES
Encourage Capital has worked with support from Bloomberg Philanthropies and The Rockefeller
Foundation to develop the first sustainable fisheries public-private partnership (or PPP) impact
investment strategy. The Nexus Blue Strategy (Nexus Blue) is a hypothetical $34.0 million PPP
impact investment to improve IUU (illegal, unreported, and unregulated) enforcement and
facilitate transparency and information sharing across the supply chains of these high-value
products. This investment will pay for the deployment of hard and soft infrastructure to combat
IUU fishing and to facilitate transparency and information sharing across the supply chains of
high-value fish species. Private capital proceeds will be used to refurbish and operate the General
Santos Fish Port Complex (GenSan), the largest tuna port in the Philippines, and invest in data
collection and monitoring of the relevant fisheries. Proceeds will pay for hard infrastructure as
well as the deployment of IT infrastructure to virtually link the downstream buyers, upstream
(on-the-water) harvesters, port market actors, dockside catch accountants, national and regional
fisheries authorities, and independent researchers. This soft infrastructure will leverage
constrained fisheries management and enforcement resources far more effectively by integrating
digital capabilities and applying big data analytics. By using the analytics and traceability tools
common across nearly every other product supply chain, regulators can also harness the power of
the market by arming buyers with the knowledge to punish violators while rewarding sustainable
practices. Integrated PPP investments of this nature promise to eliminate the long standing
information and cost barriers to strong, coordinated, multi-stakeholder fisheries management
facing the highly-migratory pelagic fisheries of the Western and Central Pacific Ocean (WCPO).
COMMERCIAL HIGHLY MIGRATORY PELAGIC SPECIES OF THE WESTERN AND CENTRAL PACIFIC OCEAN
Bigeye Tuna Black Marlin Yellowfin Tuna

(Thunnus obesus) (Makaira indica) (Thunnus albacares)
A VIBRANT OCEANS INITIATIVE
Skipjack Albacore Frigate Tuna

(Katsuwonus pelamis) (Thunnus alalunga) (Auxis thazard thazard)
Nexus Blue intends to achieve these objectives by upgrading strategic port infrastructure and
post-harvest facilities, installing 2.4 MW in solar PV capacity, and deploying the IT hardware and
software to fight IUU fishing while informing better resource management across the 429 vessel
fleet actively using the port. Investors would be compensated through the ongoing collection of
port fees and rental revenues under a 30-year PPP concession with the Philippine government.
1
These measures will also ensure compliance with EU and U.S. demands for monitoring, control
Impact Investing for Sustainable Global Fisheries
and surveillance (MCS) and chain-of-custody to address the scourge of IUU fishing in the region.
The poor, highly-vulnerable nearshore fishers who are directly harmed by the illegal fishing
operations that poach fish from their local waters stand to benefit from a share of the $620
million that IUU fishing costs the Philippines alone each year1. The Nexus Blue Strategy targets a
15.0% blended IRR and 22.3% equity IRR2 for investors over a 33-year term (including a 3-year
construction & implementation period in addition to the 30-year concession.)
1
Southeast Asian Fisheries Development Center, Fish for the People, Vol. 8, No.1, 2010, page 11.
2
The sponsor IRR (internal rate of return) of a SPV under a PPP structure considers that the sponsors are generally expected to commit
junior or mezzanine debt to the capital structure in addition to their equity investment; the blended IRR accounts for the multiple types
of securities that project sponsors invest into an SPV such as NexusCo, and the interest, repayment and dividends received by sponsors
after servicing the Senior commercial bank project loans.
THE NEXUS BLUE STRATEGY
The Nexus Blue Partnership Strategy (Nexus warning in April 2015. However, serious questions
Blue) is a hypothetical $34.0 million public-private remain as to how to implement these new
partnership investment structure to finance and legislative requirements.
implement targeted infrastructure and IT solutions
that enable management reforms throughout the Nexus Blues FIMS component would integrate
supply chain of the Philippines high-value regional with the Philippine National Stock Assessment
tuna fisheries. This strategy targets the operations Program (NSAP), and deliver critical data to the
and infrastructure of the General Santos Fish Port Western Central Pacific Fisheries Commission
Complex (GenSan), which serves as a platform (WCPFC), which manages highly migratory
for investment in a comprehensive fisheries fish stocks across the region. The GenSan port
information management system (FIMS) PPP. modernization component would restore the
The GenSan port functions as a bridge between facility while making improvements to sanitation,
on-the-water production and high value export markets, and post-harvest facilities. The
markets, and offers a natural leverage point in the modernization initiative would also install solar
otherwise complex and diffuse supply chain. power generation capable of meeting over 50%
of the upgraded ports power needs and build
Over 90% of total fish landings at GenSan are sourced 3,000 tons of new cold storage capacity, while
from highly migratory, regional tuna populations. increasing operational efficiencies and building
Strong national, regional and international regulations shore-based governance capabilities. As the only
and standards do exist to govern these stocks, at port certified to export product to the EU and
least on paper. Fisheries authorities, however, are U.S., GenSan represents a critical path to market
often unable to implement and enforce existing laws. that the Philippine commercial fishing industry
The reasons for this vary, but include budgetary cannot ignore, and that buyers can look to with
constraints, industry opposition, the common- confidence and transparency.
resource nature of the sea, and limited data.
While the Nexus Blue Strategy alone cannot expect
However, for the first time, this lack of effective to directly cause fish stock recoveries, especially
regulation is beginning to have an impact on in the short-term, it would aim to catalyze positive
industry as well, and governments are taking reform momentum and provide the foundation
notice. Top international market destinations, led for sustainable fisheries management. This would
by the European Union, are demanding fisheries include an effort to secure the commitment
management reform, compliance with international of Philippine fisheries authorities to complete

IUU commitments, and transparency across implementation of fishery-wide vessel registration
the supply chain. In April of 2014, the European and establish maximum catch limits for the tuna
Community issued a yellow-card warning to the and sardine fisheries as a part of the PPP process.
Philippines because of the high incidence of IUU Nexus Blue has the potential to generate stable and
fishing and lack of regulatory control over fisheries, attractive financial returns, targeting a 15.0% blended
which threatened to restrict access to the EU, a sponsor IRR in the base case, with equity returns
2 $164 million annual export market for Philippine of 22.3% over an assumed 33-year total investment
tuna products. The Philippines government quickly term. Finally, Nexus Blue can provide a novel,
took action and passed legislation to address its replicable model for public-private partnerships
fishery management deficiencies, and as a result, focused on national scale fisheries management
the European Commission lifted the Yellow-Card improvements across the region and beyond.
Direct Impact and Creates a best-in-class data collection and management system in partnership with the
Financial Returns Philippines government capable of electronic monitoring and reporting, traceability,
and near real-time data transmission covering 429 vessels.
Addresses EU requirements for Vessel Monitoring Systems (VMS), traceability, and
reporting, while informing regional stock assessments with improved catch accounting.
Ensures that 100% of the product passing through GenSan is legally sourced and
accounted for.
Increases crew welfare by providing electronic communications and internet access.
Targets a 15.3% blended IRR and a 22.3% levered equity IRR over a 33-year
investment period.
Indirect Impact Provides the foundation necessary to establish and implement science-based catch
Returns limits across Philippine fisheries.
Benefits vulnerable small-scale fishers by protecting their local fisheries resources from
outside poachers.
Offers authorities the tools to stamp out slavery and child labor practices.
Removes key barriers to migratory fish stock restoration and management
improvements in the Philippines.
Serves as a model for replication throughout the region and broader ecosystem.
KEY VALUE DRIVERS

The Nexus Blue Strategys value proposition novel technologies and enhanced value provided
centers on a public sector concession to a by post-harvest infrastructure upgrades. Data
private sector partner to renovate, build, operate infrastructure both onsite and deployed across
and maintain key strategic public assets in the vessels using the port will satisfy currently unmet
seafood supply chain and support monitoring governance needs and will be funded through
and enforcement of fisheries regulations. The key revenue generated at the port. The table below
drivers of cash flow would be user fees, increased summarizes the key value drivers supporting the
product throughput, operating efficiencies, Nexus Blue investment thesis:
HIGHLIGHT DETAILS
Incentive alignment Nexus Blue endeavors to finance the on-the-water IT and monitoring
with industry infrastructure for industry, while providing improved port landings, market and
post-harvest infrastructure.
Port renovations and improved operations will enhance product value, with the
ultimate goal of developing a brand around GenSan via product validation and
differentiation for seafood producers sourcing raw materials from GenSan.
Leverages strong Nexus Blue will significantly enhance the Philippine fisheries management
regulatory enabling framework and lay a foundation to catalyze management improvements in other
conditions threatened national fisheries.
Uses innovations The use of on-board data capture technologies, dockside catch accounting, and
3 to increase fisher other data systems in combination with financial market incentives to reward
compliance fishers for sustainable practices can increase fisher compliance with fisheries
management improvements.
Establishes best-in-class The project links FIMS solutions to regional partners and fisheries management
partnerships organizations, and partners with existing initiatives such as the USAID OCEANS
Project to expand the fisheries data management platform across the region.
Leverages natural GenSan is the only Philippine port certified for EU and U.S. export, providing
monopoly for access to important market access.
high value export markets
Positive investment The Philippines is currently considered one of the most attractive foreign
climate investment destinations in the region, and its sovereign credit rating by all three
major rating agencies has been steadily improving.
PROFILE OF THE NEXUS BLUE STRATEGY FISHERY
T he Philippines is an island nation in the heart of Southeast Asia populated by 100 million people and
composed of over 7,000 islands situated in the western Pacific Ocean. Located at the apex of the Coral
Triangle and encompassing most of the Sulu-Celebes Sea Large Marine Ecosystem, the Philippines seas are
a hotspot of marine biodiversity spanning over 2 million square kilometers and containing nearly 60,000
square kilometers of coral reef habitat (Figure 1).3, 4
Fishing is culturally, economically, socially, and ecologically important to the Philippines. Millions of Filipinos
depend on the health and productivity of the coastal and marine environments for their livelihoods and
food security, where seafood accounts for more than 56% of the total animal protein consumed in the
country. Philippine citizens consume 30 to 60 g per day of seafood,5 significantly higher than the global
average of 17 g per day.6 In 2013, the Philippines reported 2.3 million tons of total marine fish capture,
ranking second after Indonesia in the Southeast Asia region, and 11th worldwide.7
FIGURE 1: Philippines Fisheries Snapshot
7,107 islands Exclusive Economic Zone:
36,289 km coastline 2,265,684 km2

2012 fisheries production:

4.8 million metric tons
5400+ commercial vessels
4 1 million registered fisherfolk 41%

Poverty
incidence
3
Ibid. pg. 2
4
Burke et al. Reefs at Risk Revisited, World Resources Institute, 2011.
5
Daniel Pauly and MLD Palomares, Philippine Marine Fisheries Catches: A Bottom-Up Reconstruction, 1950-2010, Research Report,
UBC Fisheries Center, 2010.
6
Food and Agriculture Organization of the United Nations, The State of World Fisheries and Aquaculture, 2014.
7
Daniel Pauly and MLD Palomares, Philippine Marine Fisheries Catches: A Bottom-Up Reconstruction, 1950-2010, Research Report,
UBC Fisheries Center, 2010.
In spite of well-formulated fisheries management increase fishing efficiency and capture potential
policies, stocks have been declining overall within
Economic development policies of governments
Philippines waters.8 The reasons for this vary, but
all illustrate the need to effectively manage this Growing human population
critical resource and enable more consistent, more Increase in fish prices for a growing
accurate, and lower-cost long-term data capture global market9
to better monitor the status of the stock and the
Overfishing and excessive fishing pressure
actors harvesting it. Given the importance of the
countrys fishing industry, declining fish stocks pose Inappropriate exploitation; post-harvest losses
a significant challenge. Literature on Philippines Habitat degradation
fisheries cites a number of common reasons for
Lack of technical/human resources,
overfishing and stock collapse, including:
including monitoring and data collection
Open access fishing with a lack of management, and management10
regulation, and enforcement Environmental conditions (e.g., climate change,
Technological advances (e.g., more efficient poor water quality)
gear; larger nets; electronic fishing devices)
STOCK PROFILE AND CURRENT STATUS

The Philippines is strategically located along Fisheries Commission (WCPFC). The WCPFC is
the so-called tuna highway (see Figure 2), a a regional fisheries management organization
corridor for highly migratory pelagic species 11
(RFMO) established by the Convention for
that runs from the Indian Ocean to the Western the Conservation and Management of Highly
and Central Pacific Ocean (WCPO). Because Migratory Fish Stocks in the Western and Central
the stocks are highly migratory and do not fall Pacific Ocean (WCPF Convention), which was
within the jurisdiction of a single state, they are implemented on June 19, 2004.
5 managed by the Western and Central Pacific
8
The Fish Site, Philippines Reports Agriculture, Fisheries Growth Despite Typhoon Yolanda, May 27, 2014, available at
http://www.thefishsite.com/fishnews/23255/philippines-reports-agriculture-fisheries-growth-despite-typhoon-yolanda.
9
Ibid.
10
Ibid.
11
Pelagic fish are those that live within the water column of coastal, ocean, and lake waters, but not on or near the bottom.
Figure 2: The Tuna Highway and WCPFC Statistical Area
100W
140W
160W
150W
130W
120W
170W
110W
90W
80W
140E
70W
160E
130E
150E
120E
170E
110E
180
60N 60N
50N 50N
40N 40N
30N 30N
20N 20N
10N 10N
0 0
10S 10S
20S 20S
30S 30S
40S 40S
50S 50S
60S 60S
100W
140W
160W
150W
130W
120W
170W
110W
90W
80W
140E
70W
160E
130E
150E
120E
170E
110E
180
The species of particular concern to this strategy audax), Blue Marlin (Makaira nigricans), and
are primarily the commercial tuna, specifically Swordfish (Xiphias gladius) (Figure 4). All of these
Yellowfin (Thunnus albacares), Bigeye (Thunnus species are highly migratory, and travel thousands
obesus), Albacore (Thunnus alalunga), Skipjack of miles spanning the waters of multiple countries
(Katsuwonus pelamis), Frigate Tuna (Auxis thazard to feed and reproduce. As a result, stocks cover
thazard) (Figure 3). Other commercial fish caught a wide geographic distribution at any given time,
in these waters include billfish such as Black and do not remain within the Philippines 200-mile
Marlin (Makaira indica), Striped Marlin (Tetrapturus national exclusive economic zone (EEZ).
FIGURE 3: WCPFC Tuna Species Landed in the Philippines
6
Yellowfin Tuna Bigeye Tuna

(Thunnus albacares) (Thunnus obesus)
Frigate Tuna Albacore Skipjack

(Auxis thazard thazard) (Thunnus alalunga) (Katsuwonus pelamis)
FIGURE 4: WCPFC Billfish Species Landed in the Philippines
Striped Marlin Swordfish

(Tetrapturus audax) (Xiphias gladius)
Blue Marlin Black Marlin

(Makaira nigricans) (Makaira indica)
The WCPFC oversees the worlds largest tuna within just the exclusive economic zones (EEZs)12
fisheries, with over 2.8 million metric tons (mt) of of island nations in the WCPFC such as Kiribati,
commercial tuna landed in 2014. This is over 30% Papua New Guinea, and Indonesia are nearly as
greater than the entire volume of landings in the large, or larger, than the entire volumes landed
Indian Ocean, Atlantic Ocean and Eastern Pacific from the worlds other major tuna-producing
Ocean combined. The landings sourced from oceans (Figure 5).
WCPFC STOCK STATUS
The status of key tuna stocks in the WCPO is relative to its stock size (see Figure 6). In addition
relatively robust, with the exception of bigeye, to bigeye overfishing, there are serious problems
which is widely recognized as overexploitated of IUU fishing, juvenile catch, and bycatch.13
FIGURE 5: Relative Size of the WCPFC Tuna Fisheries

WESTERN PACIFIC OCEAN IN CONTEXT Key Facts:

8 2% of Pacific
2014 Tuna Catch by 2014 Tuna Catch in Individual tuna catch
Global Ocean Basin (mt) Pacific EEZs versus 6 0% of Global
tuna catch
Global Ocean Basins (mt)
40%
within
2,846,280 Western Pacific 832,138
The Pacific
Ocean Community EEZs
706,782
646,081
Indian Ocean
7 832,138
Eastern Pacific 494,654
465,367
Ocean
646,081 343,806
Atlantic Ocean
465,367
Indian Kirbati Eastern Indonesia Atlantic Papua

Ocean EEZ Pacific Ocean New
Ocean Guinea
Source: SPC (Secretariat of the Pacific Community), 2015.
12
An exclusive economic zone (EEZ) is a maritime zone defined under the United Nations Convention on the Law of the Sea (UNCLOS) as
that which a state has rights over regarding the exploration and use of marine resources, stretched perpendicular to the coastline out to
200 nautical miles from the coast.
13
Food and Agriculture Organization of the United Nations, The State of World Fisheries and Aquaculture, 2014.
While the primary tuna species, including the substantially over the past several decades, the
yellowfin, albacore, frigate, and skipjack tunas, are spawning stock biomass14 of yellowfin, albacore,
not overexploited within the WCPFC region as a and bigeye has declined (Figure 7). At the global
whole, localized overfishing is occurring in areas level, a recent report found that the global index
across the region, including within the Philippines for Scrombidae, the family of mackerels, tunas, and
EEZ. Bigeye stocks, however, are threatened bonitos, declined by 74% between 1970 and 2010,
throughout the WCPFC waters, largely a result of and many tuna fisheries worldwide are
juvenile harvest by purse seine and ring net gear under threat (Figure 8).15
(Figure 6). Moreover, with landings increasing
FIGURE 6: The Status of Key Tuna Stocks in the WCPO16
STATUS OF KEY TUNA STOCKS

Overfished
2.0
F>FMSY
Overfishing
Fishing Effort Index F/Fmsy
1.5 Bigeye
F=FMSY
1.0
Yellowfin Skipjack
Healthy
0.5
F<FMSY
SP - Albacore
0.0
0 1 2 3 4 5
8 SB<SBMSY SB=SBMSY SB>SBMSY
Stock Size Index SB/SBmsy
Source: SPC (Secretariat of the Pacific Community), 2015.
14
Spawning Stock Biomass (SSB) is the biomass of mature, reproductive individuals in the population.
15
Living Blue Planet Report, Species, Habitats and Human Well-Being, WWF [J. Tanzer, et al., eds., WWF, Gland, Switzerland, 2015, pp. 7
and 27, available at: http://d2ouvy59p0dg6k.cloudfront.net/downloads/living_blue_planet_report_1.pdf.
16
The health of a fish stock is primarily a function of two components: 1) the current size of the stocks biomass relative to a theoretical
sustainable maximum or minimum stock size (shown here as the ratio of current spawning stock biomass to the spawning stock biomass
at maximum sustainable yield, or SB/SBMSY); and 2) the current fishing effort relative to the maximum sustainable yield (F/FMSY). The
lower right-hand quadrant of Figure 6 indicates sustainable stock size and fishing effort at or below MSY, suggesting favorable long-term
outcomes, while the upper left-hand quadrant indicates depleted stock size and fishing effort above MSY, which suggests that the stock
has either collapsed or is at risk of collapse.
FIGURE 7: Time Series of Commercial Tuna Species Spawning Biomass in the WCPFC
'
' '' Figure*5:*Time*series*of*commercial*tuna*species*spawning*biomass*in*the*WCPFC.*
YELLOWFIN TUNA
Figure*5:*Time*series*of*commercial*tuna*species*spawning*biomass*in*the*WCPFC.*
SKIPJACK TUNA
Yellowfin$Tuna Skipjack$Tuna
5,000 Yellowfin$Tuna 6,000 Skipjack$Tuna
Skipjack$Tuna
Spawning Biomass (1,000s mt)

Yellowfin$Tuna
Yellowfin$Tuna Skipjack$Tuna
4,000 5,000
4,000
3,500
3,500
2,000
2,000
1,000
1,000
1950 1960 1970 1980 1990 2000 2010 1980 1990 2000 2010
BIGEYE TUNA ALBACORE TUNA

Bigeye$Tuna Albacore$Tuna
Bigeye$Tuna Albacore$Tuna
Bigeye$Tuna
Bigeye$Tuna 500 Albacore$Tuna
Albacore$Tuna

2,000
400
1,500
300
1,000
200
500
100
1950 1960 1970 1980 1990 2000 2010 1960 1970 1980 1990 2000 2010
'
' '
' '
' '
' Philippines'Role'in'the'WCPO'
Source: SPC, 2015.
Philippines'Role'in'the'WCPO'
As$ of$ 2015,$ WCPFC$ had$ a$ total$ of$ 814$ Philippine$ registered$ vessels.$ The$ Secretariat$ of$ the$ Pacific$ Community$
As$ of$2015,$
2015,$ WCPFC$had$ had$ a$
a$ total$
total$ of$ 814$ Philippine$ registered$ vessels.$ The$ Secretariat$ of$of$
the$ Pacific$ Community$
As$
As$of$of$ 2015,$WCPFC$ of$of$
814$ Philippine$ registered$ vessels.$ The$ Secretariat$ the$
of$Pacific$
(SPC)$Regional$Tuna$Fishery$Database$registered$29$Philippine$flag$purse$seine$vessels$in$Pacific$Island$countries$
WCPFC$ had$ a$ total$ 814$ Philippine$ registered$ vessels.$ The$ Secretariat$ Community$
the$ Pacific$ Community$
14
waters$in$2014. $
14
waters$in$2014.
waters$in$2014. $$ $Selected Global Tuna Fisheries as of 201417
1414
FIGURE waters$in$2014.
8: Stock Status of
$
$ $$
OCEAN $ RFMO BIGEYE YELLOWFIN SKIPJACK ALBACORE
$ $$
IndianAmong$ Among$ Philippines$ regulatory$
ITOCregulatory$ agencies,$ the$ Bureau$
Moderately of$ Fisheries$ and$ Aquatic$
Moderately Resources$ (BFAR)$
Moderately is$ the$ primary$
Among$ Philippines$
Philippines$ regulatory$ agencies,$
agencies,$ the$
the$ Bureau$
Bureau$ of$
of$Fisheries$
Fisheries$and$
and$Aquatic$ Resources$
Aquatic$ Resources$ (BFAR)$ is$Moderately
(BFAR)$ the$ primary$
is$ the$
Among$organization$for$designing,$implementing,$and$collating$catch$accounting$systems$in$the$Philippines,$and$is$the$
Philippines$ regulatory$ agencies,$
Exploited the$ Bureau$ of$ Fisheries$
Exploited and$ Aquatic$ Resources$
Exploited
organization$for$designing,$implementing,$and$collating$catch$accounting$systems$in$the$Philippines,$and$is$the$ (BFAR)$
Exploitedis$primary$
the$ primary$
organization$for$designing,$implementing,$and$collating$catch$accounting$systems$in$the$Philippines,$and$is$the$
national$counterpart$to$the$WCPFC$when$inputting$to$regional$stock$assessments.$BFAR$has$a$number$of$data$
organization$for$designing,$implementing,$and$collating$catch$accounting$systems$in$the$Philippines,$and$is$the$
9 Eastern national$counterpart$to$the$WCPFC$when$inputting$to$regional$stock$assessments.$BFAR$has$a$number$of$data$
Pacific IATTC Moderately
national$counterpart$to$the$WCPFC$when$inputting$to$regional$stock$assessments.$BFAR$has$a$number$of$data$ Moderately
collection$approaches$that$contribute$to$the$NSAP.$
national$counterpart$to$the$WCPFC$when$inputting$to$regional$stock$assessments.$BFAR$has$a$number$of$data$
Overfished
Fully Exploited
Exploited Exploited
Western & WCPFC Moderately Moderately Moderately

Overfished
Central Pacific Exploited Exploited Exploited
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$
$$$$$$$$$$$$$$$$$$$$$
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
Atlantic14
ICCAT$$$$$$$$$$$$$$$$$$$$$
14
$Annual$Report$to$the$Western$and$Central$Pacific$Fisheries$Commission$(WCPFC),$Part$1:$Information$on$Fisheries,$Research,$and$Statistics,$Philippine$Annual$Fishery$Report$
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
$$$$$$$$$$$$$$$$$$$$$
Moderately Moderately
14 $Annual$Report$to$the$Western$and$Central$Pacific$Fisheries$Commission$(WCPFC),$Part$1:$Information$on$Fisheries,$Research,$and$Statistics,$Philippine$Annual$Fishery$Report$
Update,$June$2015,$p.$7,$available$at:$https://www.wcpfc.int/system/files/AR6CCM620%20Philippines%20AR%20Part%201_0.pdf.$
14 Overfished
Update,$June$2015,$p.$7,$available$at:$https://www.wcpfc.int/system/files/AR6CCM620%20Philippines%20AR%20Part%201_0.pdf.$ Overfished
Exploited
Update,$June$2015,$p.$7,$available$at:$https://www.wcpfc.int/system/files/AR6CCM620%20Philippines%20AR%20Part%201_0.pdf.$ Exploited
Update,$June$2015,$p.$7,$available$at:$https://www.wcpfc.int/system/files/AR6CCM620%20Philippines%20AR%20Part%201_0.pdf.$
Source: www.atuna.com
17
Moderately Exploited stock is being fished below MSY (replacement level), not currently in danger of overfishing;
Fully Exploited stocks are being fished up to MSY and cannot withstand any additional fishing pressure;
Overfished stocks are being fished at levels above MSY, leading to short-term stock depletion and the possibility of stock collapse.
THE PHILIPPINES ROLE IN THE WCPO
As of 2015, WCPFC reported 835 vessels Philippines vessels registered under the WCPFC
registered under the Philippine flag, which is 14.7% include bunker vessels, fish carrier vessels, handline
of the regional total. The Secretariat of the Pacific vessels, longline vessels, mothership aggregating
Community (SPC) Regional Tuna Fishery Database vessels, purse seine vessels, multipurpose vessels,
registered 29 Philippine flag purse seine vessels in and support vessels, with over 75% falling under
other Pacific Island countries waters in 2014. 18
250 gross ton (gt) in weight, and 12% exceeding
500 gt (Figure 9).19, 20
FIGURE 9: Classification of Philippine Registered Commercial Vessels of the Western and Central Pacific Fisheries Commission (WCPFC)
PHILIPPINE VESSEL TYPES PHILIPPINE VESSEL SIZE

REGISTERED IN THE WCPFC CLASSES IN THE WCPFC
Vessel Type:
Bunker 12%
Fish carrier
Fishing vessel
30% 12%
(unspecified)
44%
Handline
1% Longline
3% 0% Mothership 76%
Multipurpose
1%
20% vessel
1%
Purse seine
Support vessel Vessel Size Class:

There are 835 Philippine Vessels
Registered with the WCPFC <250 gt >250 g t >500 gt
Source: Annual Report to the WCPFC, Part 1: Information on Fisheries, Research and Statistics, Philippine Annual Fishery Report Update,
August 614, 2014.
The Philippines is among the worlds top tuna primary organization for designing, implementing,
producers, representing approximately 10% of total and collating catch accounting systems in the
10
landings in within the WCPO, landing nearly 16% of Philippines, and is the national counterpart
yellowfin tuna in the region by volume. to the WCPFC when inputting to regional
stock assessments.
Among Philippines regulatory agencies, the Bureau
of Fisheries and Aquatic Resources (BFAR) is the
18
Annual Report to the Western and Central Pacific Fisheries Commission (WCPFC), Part 1: Information on Fisheries, Research, and
Statistics, Philippine Annual Fishery Report Update, June 2015, p. 7, available at: https://www.wcpfc.int/system/files/AR-CCM-20%20
Philippines%20AR%20Part%201_0.pdf.
19
Ibid.
20
Annual Report to the WCPFC, Part 1: Information on Fisheries, Research, and Statistics, Philippine Annual Fishery Report Update, August
614, 2014
STOCK STATUS AND THREATS WITHIN PHILIPPINES WATERS
While regional fish stocks across the WCPFC Since 1950, the catch per unit effort of Philippines
are in currently not considered overfished (with fisheries has fallen dramatically. Recent data
the exception of bigeye tuna), the state of these suggests current CPUE levels are nearly 1/10th
species within Philippines waters is indicating the levels they were prior to 1950. This indicates
signs of strain. Yellowfin tuna is considered fully overexploitation of fish populations by increasing
exploited and skipjack tuna moderately to fully
21
number of fishers, despite dramatic improvements
exploited, while Catch-Per-Unit-Effort (CPUE) has in technology.
been falling over time (See Figure 10).22
FIGURE 10: Trend of Catch Per Unit Effort (Tons Per Horsepower (mt/Hp)) for Municipal Small Pelagic Fisheries
in the Philippines Since 1948
DIMINISHING CPUE
1950 Since 1950 a clear

trend has emerged
1960
where catch per unit
1970 of effort has dropped
nearly 50% decade
1980 on decade
1990
2000
1 2 3
CPUE: mt/HP
11
Source: S.J. Green, A.T. White, J.O. Flores, M.F. Carreon III, A.E. Sia, Philippine Fisheries in Crisis: A Framework for Management, 2003,
Philippines, p 67. Note: Data interpolated from graph published in above report.
21
Gross ton is a unit of a ships internal-storage capacity, equal to 100 cubic feet (2.83 cubic meters).
22
Blue Earth Report to Oceana, Understanding Fisheries, Fisheries Governance, Policy-Making, the Stakeholders Landscape, and
Organizational Operation in the Philippines, September 28, 2012, p. 14.
STOCK MANAGEMENT APPROACH AND CHALLENGES
REGIONAL REGULATORY CONTEXT FOR HIGHLY MIGRATORY STOCKS
The Western and Central Pacific Fisheries The species covered under the WCPF Convention
Commissions (WCPFC) mandate is to address are albacore bigeye, skipjack, yellowfin, black
challenges to the sustainable management of high marlin, blue marlin, striped marlin, and swordfish. In
seas and regional fisheries. The Commissions specific partnership with member states, the WCFPC also
responsibilities include developing and managing a collects data on certain shark species. Catches and
framework that legally binds participating private discards of other species are not considered under
fishing entities to fisheries management compliance, the WCPFC framework.23 The industrial fishing gear
secures multilateral state participation, adapts types used in the WCPFC region primarily include
to the unique needs of developing countries and pole and line, longline, purse seine, and trawl, and
enables cooperation with other Regional Fisheries those vessels that are either flagged to participating
Management Organizations (RFMOs) whose work nations or chartered foreign vessels fall under the
and/or species under management overlap with WCPF Convention.24
those of the WCPFC.
PHILIPPINE NATIONAL FISHERIES REGULATORY CONTEXT
Philippine fisheries are governed at both the systems within countrys EEZ, as well as activities
national and local levels, and national regulators involving domestic-flagged vessels product
collaborate with regional fisheries management landed in the Philippines. The DAs Philippine
organizations (RFMOs) in the case of highly Fisheries Development Authority (PFDA) is tasked
migratory species like tuna. with promoting the fishing industrys growth
and managing critical public supply chain and
At the national level, fisheries management and
logistics infrastructure. The PFDAs responsibilities
enforcement falls under the jurisdiction of the
consist primarily of operating and investing in
Department of Agricultures (DA) Bureau of
the construction and maintenance of regional
Fisheries and Aquatic Resources (BFAR). The
commercial fishing ports and post-harvest facilities
BFARs mandate includes issuing licenses and
to improve handling, storage, marketing, and
permits according to the principle of Maximum
distribution of seafood products. The PFDA currently
Sustainable Yield (MSY), establishing strategies
owns and operates GenSan and seven other regional
with the private sector to ensure sustainable use

fish port complexes across the country.
of fishery resources, establishing and maintaining
a fishery information system, coordinating Further layers of governance fall at the provincial,
marketing activities, and formulating rules to municipal (called Local Government Units, or LGUs),
conserve highly migratory, multi-jurisdictional and barangay (village) level. Management efforts
species. The BFAR and the National Fisheries at these levels are supported by key research
Research and Development Institute (NFRDI) are agencies including the NFRDI, the NSAP, and the
the main organizations responsible for designing, Bureau of Agricultural Statistics (BAS).
12
implementing and collating catch accounting
23
Coastal Governance Index 2015. The Economist Intelligence Unit, 2015.
24
Tuna Fishery Handbook, 2014, WCPFC, 2014.
THE PRINCIPAL OF TOTAL ALLOWABLE CATCH
In theory, the Philippines Fisheries Code 1998 Fisheries data for use in the stock assessment
operates on a principle of a Total Allowable Catch process is collected primarily through regular
(TAC) ceiling set below the Maximum Sustainable port sampling conducted under the National
Yield (MSY) for the species. These benchmarks Stock Assessment Program in major landing
were established through robust data collection sites. Currently, BFAR is using paper-based log
and stock assessments, in accordance with sheets which results in significant delays in data
regional and international fisheries laws such as the transmission (between three months and a year),
UN Convention on the Law of the Sea (UNCLOS), input errors, added labor and administrative
the UN Fish Stocks Agreement (UNFSA) and the costs, and poor data integrity. However, 20 purse
FAOs International Plan of Action on IUU Fishing seine vessels in the Philippines are now using the
(IPOA-IUU). BFAR and the NFRDI cooperate with Collected Localization Satellites (CLS) and Marine
RFMOs such as the WCPFC to inform the regional Logbook Information (MARLIN) electronic logbook
stock status of highly migratory species, set TAC system, and BFAR has prioritized building its
levels, and manage effort limits. digital data collection capabilities.25
FISHERIES MANAGEMENT CHALLENGES

GOVERNANCE LIMITATIONS
Despite long-standing and recent efforts to across four critical aspects of effective fisheries
improve fisheries management, the Philippines management: research capability, management
fisheries governance system ranks 21st out of the capacity, and enforcement.26 Nearly in the bottom
top 28 fish-producing countries that deliver 80% of quartile, the Philippines scores low on the index
global seafood supplies. Recent research published relative to other developing country peers such as
by the Ocean Prosperity Roadmap ranks countries Vietnam or Mexico (Figure 11).
FIGURE 11: Fisheries Governance Index
FISHERIES GOVERNANCE INDEX PRELIMINARY RESULTS

1 Colored circles represent

0.9
index values for each
dimension separately,
0.8 averaged across
respondents and species
0 .7
for each country.
0.6
0 .5 Research
Management
0.4
13 Enforcement
United States
Norway
Iceland
Russia
New Zealand
Canada
South Africa
France
Argentina
Spain
United Kingdom
Chile
Peru
Japan
South Korea
Vietnam
Mexico
Morocco
Malaysia
India
Philippines
Nigeria
Indonesia
Bangladesh
Brazil
China
Thailand
Myanmar
Socioeconomics
Source: Oceans Prosperity Roadmap.
Likewise, the Economist Intelligence Units 2015 fisheries management and conservation, ranked
Coastal Governance Indexs Living Resources the Philippines tied for second to last of 20
category, which is heavily weighted toward countries surveyed (see Figure 12).27
25
N. C. Barut and E. G. Garvilles, WCPFC, Annual Report to the Commission, Part 1: Information on Fisheries, Research and Statistics,
Scientific Committee Eleventh Regular Session, Pohnpei, Federated States of Micronesia, August 513, 2015, p. 10.
26
Oceans Prosperity Roadmap, 2014. Governance & Marine Fisheries.
27
Coastal Governance Index 2015. The Economist Intelligence Unit, 2015.
FIGURE 12: EIU 2015 Coastal Governance Index - Living Resources Category Rankings
CATEGORY RANKING, LIVING RESOURCES
RANK/20 COUNTRY SCORE/100 RANK/20 COUNTRY SCORE/100
1 United States 97 -10 Russia 62

2 New Zealand 94 12 South Africa 60
3 France 91 13 Mexico 51
4 Spain 83 -14 Indonesia 37
5 Norway 79 -14 Peru 37
6 Brazil 78 16 Vietnam 34
7 Canada 77 -17 India 31
8 Chile 71 -17 Nigeria 31
9 South Korea 70 -17 Philippines 31
-10 Japan 62 20 China 25
ILLEGAL, UNREPORTED, AND UNREGULATED (IUU) FISHING ACTIVITY
IUU fishing in Philippine and regional waters is The Philippines is party to a number of
considered a serious problem, especially as related international agreements committed to countering
to the catch of migratory pelagic species like tuna.28 IUU activity through better MCS, better data
In the Philippines alone, an estimated 460,000 mt capture, and better traceability across the supply
of fish are illegally harvested each year, translating chain, including the UNCLOS, UNFSA and the IPOA-
to annual economic losses of up to $620 million, or IUU, among others. In spite of these commitments,
between 3% and 6% of the estimated $10 to $20 the Philippines has been identified as one of the
billion in annual global IUU costs.29,30 nations most affected by IUU fishing, particularly
related to high-value and restricted species such as
tuna, reef fish, sharks, and turtles.31
THREAT OF EUROPEAN COMMISSION TRADE SANCTIONS AND THE YELLOW CARD
Due to the Philippines failure to meet international the term of six months in order to avoid further
standards on the restraint of IUU fishing, in June consequence.32 In April 2015, the EC lifted the yellow
2014, the European Commission (EC) identified the card in recognition of the Philippines progress in
Philippines as a non-cooperating Third Country. taking steps to limit IUU fishing.33 However, without
This identification is referred to as the yellow significant reforms in the long term, the country is
card, and it functions as an official warning to the liable to receive a more severe red card that bans
14 Philippines to take action to improve the situation, all Philippines fishery exports to the European Union.
such as amending its fisheries law or taking a more This action has been taken against Guinea, Belize,
proactive approach against IUU fishing within and Cambodia as recently as 2014.
28
M. Lack, Shellack Pty Ltd., Impacts of IUU fishing in the Asia-Pacific Region, available at: http://www.slideshare.net/fishersforum/impacts-
iuu-fishingasiapacificregionmarylackctffday1.
29
European Commission, 2015. Question and Answers on the EUs fight against illegal, unreported and unregulated (IUU) fishing Fact Sheet.
30
Fish for the People, Vol. 8, No. 1, 2010, Southeast Asian Fisheries Development Center, p. 11, available at: http://www.havocscope.com/
amount-of-illegal-catches-in-the-philippines-each-year/.
31
M. Lack, Shellack Pty Ltd., Impacts of IUU fishing in the Asia-Pacific Region, available at: http://www.slideshare.net/fishersforum/impacts-
iuu-fishingasiapacificregionmarylackctffday1.
32
European Commission, Commission warns Philippines and Papua New Guinea over insufficient action to fight illegal fishing, 10 June 2014,
available at: http://europa.eu/rapid/press-release_IP-14-653_en.htm.
33
Official Gazette, PH gets green card on IUUF from the European Union, available at: http://www.gov.ph/2015/04/22/ph-gets-green-card-
on-iuuf-from-the-european-union/
THE PHILIPPINES AMENDED FISHERIES LAW OF 2015
In response to growing pressure from the EU, to install VMS. The European Commission removed
as well as new measures proposed by the U.S. the yellow card in April of 2015, following the
regarding IUU vessels and product in Philippines passage of the Amended Fisheries Law, but has said
waters, the Philippine government amended that it will carefully monitor the laws implementation.
its primary fisheries regulatory legistlation,
the Fisheries Code of 1998.34 The Philippines However, implementing the amendments will
government passed the Amended Fisheries Law be a significant challenge for the Philippines
in April 2015, 35
aimed at preventing, detecting and government, which faces substantial industry
eliminating IUU fishing by addressing specific areas opposition. In fact, the legal basis for VMS
of deficiency and signaling its commitment to installation has existed for nearly 20 years, yet
rectifying the issue. implementation and enforcement has been
politically difficult. Given its inability to fulfill its
A primary amendment was a requirement that all MCS/VMS obligations for over nearly two decades,
Philippine fishing vessels install monitoring, control, observers question whether it can effectively
and surveillance (MCS) systems, regardless of implement and enforce the recent amendments,
fishing area and the final catch destination, and which carry even stricter requirements for
BFAR issued a law requiring all tuna fishing vessels VMS compliance.
ONGOING CHALLENGES
Such strong trade sanctions as those threatened with a total imported value of $270 million, while
by the EU would greatly affect the countrys Japan imported $123 million worth in the same year.
economy, particularly in the General Santos region.
Social Unrest from Commercial
As the second largest importer of Philippines
Fishing Community
fishery products in 2013, the EU imported $190
million of primarily prepared and preserved tuna. The Amended Fisheries Law faces mounting
In 2012, EU exports of a single productcanned opposition from the fishing industry due to its
tunareached $123 million, representing 45% of strict prohibitions, including a fishing ban within
the Philippines total tuna exports and over 10% of 15 kilometers of Philippines municipal waters,
all national fisheries exports. prohibition on use of destructive gear, limits to
total allowable catch, and the mandatory MCS
Other significant impacts of a failure to address requirement. In September 2015, more than 1,000
15 the IUU situation, and threats to its ability to do so fishers protested against BFARs decision to
effectively, include: implement the Amended Fisheries Law, and in
July 2015, some 5,000 fishers and traders staged a

Threats to U.S. and Japanese Market Access
fishing holiday protest in Manila Bay. In addition
The U.S. and Japan are adopting the EUs IUU to concerns about MCS system installation costs
fishing stance, which aim to close their markets potentially reducing fishing income, the protesters
to IUU products. In 2012, the U.S. was the largest feared the risk of receiving heavy penalties
importer of fishery products from the Philippines, from violations.
34
Republic Act (RA) No. 8550, The Philippines Fisheries Code of 1998, An act providing for the development, management and conservation
of the fisheries and aquatic resources, integrating all laws pertinent thereto, and for other purposes.
35
RA 10654, An Act to prevent, deter and eliminate illegal, unreported and unregulated fishing, amending Republic Act No. 8550, otherwise
known as The Philippines Fisheries Code of 1998 and for other purposes; RA 10654 was issued on July 28, 2015, and lapsed into law on
February 27, 2015.
GENERAL SANTOS FISH PORT COMPLEX
T he City of General Santos was incorporated in 1968 on the island of Mindanao at the southern extreme
of the archipelago (Figure 13). The region is strategically located along major global shipping lanes,
with short access to markets in Malaysia, Indonesia, Brunei, and Singapore; and benefits from a deep,
natural harbor; a lack of typhoons36; a favorable climate with moderate rainfall and abundant sunshine;
fertile volcanic soil; and proximity to high-value tuna fishing grounds. As a result, the agro-industrial sector
drives the citys economy, and this region is the countrys largest producer of agricultural commodities. The
city is also home to the General Santos Fish Port Complex (GenSan), which is the countrys second largest
port by daily landings volume, leading producer of sashimi-grade tuna, and is among the worlds largest
tuna ports and a major hub in the regional supply chain.37
There were 15,936 vessel landings at GenSan in 2014; an average of 1,328 vessels/month and 44 vessels/day.
GenSan is a primary landing destination and a transshipment hub for accessing export markets including
the U.S., Europe, Japan, and Australia.
CURRENT SUPPLY CHAIN AND FISH PORT THROUGHPUT
The species landed at GenSan from the regional WCPO stocks to which the Philippines has access are
tunasnamely skipjack, yellowfin, albacore, and big-eye, as well as other pelagic, tuna-like species
including marlin, swordfish, mahi-mahi, mackerels, and scad. However, tuna dominates production, earning
GenSan the moniker of Tuna Capital of the Philippines. In 2014, 287,000 mt of tuna was landed in the
Philippines, of which nearly 180,000 mt, or 63%, passed through GenSan.38
The catch is dominated by three gear types64% caught by purse seine, 16% by ringnets, and 16% by hand
linewith the remainder landed by a small longline fleet of just four vessels registered by the Western and
Central Pacific Fisheries Commission (WCPFC). As catch has declined within the Philippines EEZ over the
FIGURE 13: Map of the Philippines and General Santos City

16
36
General Santos City lies outside of the Typhoon Belt, and is surrounded by high mountains that shelter the area from storms.
37
WCPFC, Annual Report, p 8, available at: http://www.wcpfc.int/system/files/AR-CCM-20%20Philippines%20AR%20Part%201.pdf.
38
T. Huntington, Data capture opportunities to improve fisheries management in selected commercial fisheries in the Philippines Draft Report,
Poseidon Aquatic Resource Management Ltd., Windrush, Warborne Lane, Portmore, Lymington, Hampshire SO41 5RJ, U.K., 2015, p. 5.
past decade, Philippine vessels are traveling farther 3. D
omestic transshipments from Philippines
afield to find new fishing grounds. In recent years, purse seine and ring-net (frozen) fisheries:
the share of GenSan landings from the Philippines Refrigerated transport (reefer) vessels collect
EEZ has been about 60%, while the share from product from purse seine or ring-net vessels
Papua New Guineas EEZ is 36%. However, an operating out of Manila and other Philippines
increasing amount now comes from the High Seas ports and transport it to GenSan for processing.
Pocket 1 (HSP1) zone, outside of any countrys The fishery profile is the same as that described
EEZ.39 There are four main sources of fish landed above for the GenSan-based domestic purse
at GenSan (see Figure 14): seine and ring-net vessels, and the frozen
product collected from catch vessels or
1. G
enSan-Based handline fisheries: Traditional aggregating mother ships primarily include
bancas of 8 gt with trips of up to 15 days, skipjack and yellowfin destined for
landing an average of 1.5 mt of primarily large local canneries.
yellowfin and billfish per trip. There are issues
over handling, long trip length, and chilling; and 4. I nternational transshipments of
only 20% of landed catch is export-quality, and Non-Philippines purse seine catch (frozen):
very little are sashimi-quality. Refrigerated transport (reefer) vessels collect
product from purse seine or ring-net vessels
2. G
enSan-Based domestic purse seine and operating out of international ports throughout
ring-net (chilled) fisheries: Fish aggregating the Western and Central Pacific Ocean (WCPO),
devices (FADs) fisheries catching small juvenile including Papua New Guinea, Taiwan, Japan,
pelagic tunas, neritic tuna, and small pelagic fish. Marshall Islands and Korea, and import skipjack
Fishing vessels operate for up to eight months and yellowfin to GenSan for processing. The
at sea, transferring catch to carrier vessels of fishery profile is equivalent to that described
approximately 35 gt, which land an average of above for domestic purse seine and ring-net
16 mt of primarily skipjack, juvenile yellow fin, vessels, and the imported product is primarily
neritic tuna, and scad. The key sustainability skipjack and yellowfin sent to local canneries in
threat from this fleet is the very small size of the General Santos City.40
juvenile yellowfin tuna caught using FADs, with
50% of individuals weighing less than 500 g
(1.1 lb). The product quality is also quite variable,
with considerable scope for improvement.
17 As catch has declined within the Philippines EEZ over the past
decade, Philippine vessels are traveling farther afield to find
new fishing grounds.
39
HSP 1 is an area between the regional EEZs, and borders the national waters of Palau, Micronesia, Papua New Guinea, and Indonesia, areas
closest to the Philippines where local tuna fishing companies frequently operate.
40
T. Huntington, Data capture opportunities to improve fisheries management in selected commercial fisheries in the Philippines Draft
Report. Poseidon Aquatic Resource Management Ltd, Windrush, Warborne Lane, Portmore, Lymington, Hampshire SO41 5RJ, U.K., 2015.
FIGURE 14: Current Supply Chain at the General Santos Fish Port Complex
PHILIPPINE EEZ GENERAL SANTOS

FISHING PORT
PHILIPPINE HANDLINE
FISHERY CATCHING VESSEL 26%
Yellowfin tuna MARKET 1
Marlin INTERNATIONAL
Swordfish DESTINATION
Sailfish
REEFER VESSEL
OTHER PHILIPPINE
FISHERIES WHARF 1A
Domestically-sourced
transshipment of
skipjack tuna
PHILLIPPINE EEZ, 74%

HIGH SEAS, &
OTHER EEZs CARRIER VESSEL
78%
DOMESTIC
DESTINATION
PHILIPPINE FLAGGED
MARKET 2
PURSE SEINE & RING NET
59%
FISHERIES 78%
Skipjack
Eastern little tuna
Yellowfin tuna
41%
Scads MARKET 3
Bullet tuna 22%
Other large pelagics
Other small pelagics
100%
Other spp.
LOCAL
22% CANNERIES
HIGH SEAS &
OTHER EEZs REEFER VESSEL
100%
WHARF 1B
NON-PHILIPPINE
FLAGGED FISHERIES
Internationally-sourced
transshipment of
mostly skipjack and
yellowfin tuna
Other spp.
18
Total landings at GenSan nearly doubled during the fishing fleet (excluding frozen transshipments) has
ten years after 2004, from 94,000 mt to 193,000 fallen as well in recent years (Figure 15).
mt in 2014. However, Government statistics show
These declines are widely considered to be the
that throughout the Philippines, the contribution of
result of two interrelated factors: 1) overfishing and
tuna to total seafood exports has dropped, as has
stock decline within the Philippines EEZ, leading to
the total value of Philippines tuna exports, which
decreases in catch-per-unit effort (CPUE)
fell from $665 million in 2013 to $460 million in
(Figure 16); and 2) increased restrictions placed
2014, a 31% year-on-year decline. Since 2010, total
on the ability of Philippine-flagged vessels to fish
Philippine tuna volumes have dropped nearly 20%.41
within neighboring countries EEZs. Indonesia in
The share of tuna landings sourced by the GenSan
particular has been cracking down on Philippine
FIGURE 15: Throughput by Market Location at the General Santos Fish Port Complex (20042014)
$250,000
250,000
Throughput by market (mt per annum)
120,000
Wharf 1A (Domestic
Transshipment)
Total throughput (mt per annum)

100,000
$250,000
200,000
Wharf 1B
(Intl Transshipment)
80,000
(Bars)
$250,000
150,000 Market 1 (Handline)
(Lines)
Market 2 (Purse
60,000 Seine & Ring Net)
$250,000
100,000
Market 3 (Purse
40,000 Seine & Ring Net)
Market 4 (Handline;
Not Used)
$250,000
50,000 20,000
Total Fresh
Total Frozen
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: PFDA in General Santos (unpublished data).
FIGURE 16: Catch Per Unit Effort for Purse Seiners Landing at GenSan (20062011)
5,000
4,500
4,000
Yellowfin Tuna CPUE (kg/day)
3,500
3,000
2,500
2,000
19 1,500
1,000
500
2006 2007 2008 2009 2010 2011
Source: BFAR, 2012; T. Huntington, Data capture opportunities to improve fisheries management in selected commercial fisheries in the
Philippines Draft Report. Poseidon Aquatic Resource Management Ltd, Windrush, Warborne Lane, Portmore, Lymington, Hampshire SO41
5RJ, U.K., 2015, p. 13.
41
Asian Correspondent, 2015. Philippine 2014 tuna export value down despite 51% hike in production.
FIGURE 17: Frozen Fish Landings into General Santos (20042014)
100,000 Wharf 1B
90,000 (domestic)
Annual landings (mt)
80,000
Wharf 1A
70,000 (foreign)
60,000
50,000
40,000
30,000
20,000
10,000
0
2004 2007 2008 2009 2010 2011 2012 2013 2014
Source: PFDA in General Santos (unpublished data); T. Huntington, Daa capture opportunities to improve fisheries management in selected
commercial fisheries in the Philippines Draft Report. Poseidon Aquatic Resource Management Ltd, Windrush, Warborne Lane, Portmore,
Lymington, Hampshire, U.K., 2015, p. 14.
vessels encroaching in its waters, and Indonesian products were the second largest category with
authorities captured and sank 11 Philippine vessels 2013 volumes totaling 28,808 mt.43
originating from General Santos in 2015.
Of the 180,000 mt in total tuna landings at GenSan in
The Philippines role in the supply chain of WCPFC 2014, the GenSan-based fishing fleet (chilled handline,
fisheries is significant, and the country is currently purse seine and ring-net fisheries) landed only 48%
the second largest canned and processed tuna of this total. The remaining 92,400 mt consisted of
manufacturer in Asia, behind Thailand. 42
The frozen transshiments from refrigerated reefer vessels
countrys tuna catch of 229,393 in 2013 comprised carrying frozen purse seine and ring-net sourced
33% of the countrys catch in that year, with 88,928 yellowfin and skipjack sourced from other ports in the
mt of exports worth $665 million. The primary Philippines (12%) and regional imports (40%) (Figure
source of export revenues came from 58,660 mt 17). This frozen product supplies the local canneries,
of canned tuna, while fresh, chilled and frozen tuna as the city of General Santos is home to six of the
countrys seven canneries.
HARVEST LOGISTICS
The large commercial vessels that fish both within acts as a floating port. The mothership aggregates
the Philippines EEZ and outside it will often remain the product and distributes it to the carrier vessels
20
at sea for several months at a time, up to as much that bring the product to land (see Figure 18).
as two years in some cases. Product is delivered The multiple transfers of product between vessels
to port by faster transporter, or carrier vessels, makes traceability a challenge, and the practice is
which can quickly bring fresh product back to used by vessels operating illegally to effectively
port. In the case of the very large mothership launder their product by having it aggregated at
vessels, product smaller catch vessels harvest sea with legitimate catch and transported to port
product and return it to the mothership, which using legal vessels.44
42
Asian Correspondent, Philippine tuna in 2015: Facing the new threat, January 28, 2015, available at: http://asiancorrespondent.com/130121/
philippine-tuna-in-2015-facing-the-new-threat/
43
Intrafish Media, 2015. Philippine tuna export value drops despite 51% hike in production.
44
Intrafish Media, 2015. Philippine tuna export value drops despite 51% hike in production.
FIGURE 18: On-the-Water Logistics and Transport
From Harvest to Landing
Some larger
fishing
vessels
remain at
sea for two
years cruising
seasonal Transporters ply between harvest vessels and ports
waters delivering supplies and returning fish.
Catch is held onboard the fishing vessel for about
3 days awaiting transporters. Once loaded onto the
transporter the return to port takes about 24 hours.
EXPORT DESTINATIONS
Fresh chilled and frozen tuna products are shipped frozen tuna are Taiwan, Korea, and, recently,
mostly to Japan, the U.S., Indonesia, Thailand, China, Japan, and Vietnam. In December 2010,
Hong Kong, and France; prepared and preserved National Statistics Office reports showed tuna
tuna products are mainly exported to the U.S., billings being $46.2 million, an increase of 51.9%
Canada, Japan, South Africa, and Germany; and compared to the same month in 2011. In 2012, tuna
dried and smoked tuna is shipped to Australia and export increased by 2% in volume and 3% in value
New Zealand. The main destinations of super- compared with 2011.
PORT INFRASTRUCTURE AND CHALLENGES

The entire land surface area of GenSan is 35.8 hall, with a total footprint of 6,000 sqm across
hectares (ha), which is used for a combination of the three markets. GenSan has two cold storage
public and private sector services and of which facilities with a combined capacity of 3,000 mt
approximately 11.5 ha are vacant lots. There are two of storage, as well as ice-making capabilities (see
21 large wharfs for very large reefer vessels, and four Figure 19).45 There are 26 lots identified for
harbor basins with the total berth space of about agro-industrial purposes at the port, but only 16
1,485 m long, which is where the smaller vessels are presently under lease, and of these just seven
dock. Each harbor basin has an affiliated market commercial lots appear to be in active use.
45
GSFPC Brochure. UK.
FIGURE 19: General Santos Fish Port Current Facilities
General Santos Fish Complex Current Situation
HARBOR BASINS
Each harbor has two types of landing facilities: type of fishing gear used, and the origin of the
a stair landing and a quay. Each basin also has fishing boats port of call, such as Manila, other
different depths, or draft, to accommodate Philippines ports, or high seas vessels that fish
different-size vessels. The use of the harbor virtually year-round in international waters outside
facilities is divided into sections according to the of the national EEZs.46
gross tonnage (gt) of vessels landed there, the
WHARFS
Extending beyond the harbor basins are two vessels unload inported frozen tuna for local
wharfs reserved for the very large foreign and local canneries, while Wharf 1B is the unloading point for
reefer transshipment vessels of 3,000 to 4,000 reefer transshipments from vessels based out of
gt that land the frozen skipjack and yellowfin land other Philippine ports.
transshipped. Wharf 1A is where foreign reefer
22
COLD STORAGE
There are two refrigeration plants owned and production capacity), ice storage (30 mt capacity),
operated by GenSan. Plant A is the original an ice crusher, cold storage (1,500 mt capacity at
refrigeration facility, built concurrently with the -35 C), a contact freezer, an air-blast freezer, and
port under the Overseas Economic Cooperation a 700 m2 processing area. Plant B was financed
Fund (OECF), which has been in operation since by a Chinese loan facility, beginning operations
1998 and includes an ice making plant (60 mt/day in 2007 and features cold storage (1,500 mt
46
Often, vessels from other ports will use GenSan instead of their port of call because of its relatively better and more hygienic facilities,
better prices for sale of catch, and shorter trip to port from fishing grounds.
capacity at -35 C), a contact freezer, an air-blast processors, fish car operators, and refrigerated fish
freezer, and a 1,800 m2 processing area. The main carrier vessels. Four companies, two in each plant,
clients of the refrigeration building are the fish currently rent processing space.
PORT GOVERNANCE STRUCTURE

Presently the Philippines Fisheries Development 2. A
dministrative and Finance Division:
Authority (PFDA) owns and operates GenSan. The Manages all administrative and financial
responsibilities such as accounting, record-
PFDA falls under the Department of Agriculture,
keeping, budgeting, and human resources.
and is mandated to promote the fishing industrys
growth and improve efficiency of the handling, 3. E

ngineering and Ice Plant Operations Division:
preserving, marketing, and distribution of seafood Manages ice plant and refrigeration operations,
products through the establishment of fish ports, port infrastructure management
and maintenance, and capital projects.
fish markets, and other public supply chain
infrastructure.47 At GenSan, the PFDA assigns 4. F
ood Safety Compliance Unit: Responsible
a Port Manager (PM) to oversee four divisions for developing and implementing a food safety
managing the daily operations of the port: management system with the assistance of and
coordination with the Post-Harvest Division of
23 1. M
arket and Harbor Operations Division: the Bureau of Fisheries and Aquatic Resources
Provides landing and marketing services to users; to ensure compliance with U.S.-FDA and EU food
formulates policies and procedures for effective safety standards.

Harbor and Market Operations; manages market
and harbor operations revenues.
47
PFDA, DA, available at: http://www.pfda.da.gov.ph/
THREATS TO PORT VIABILITY
GenSan cannot afford to undertake urgently available land within the port boundary fence
needed repairs or upgrades under the current that can be leased is presently unoccupied.
operating regime. Continuing with business as Furthermore, some of the areas leased land
usual, GenSan is likely to follow the same path as is severely behind on on receipt of payments.
Navotas, the countrys largest fish port, which fails Perhaps the most significant revenue concern to
to comply with international standards, cannot be identified at the port is the failure to increase
export product to high-value international markets, port user fees. Since the port started operating in
and is so far degraded as to be effectively beyond 1998, most user fees have remained unchanged
repair. Improvements to GenSan would undoubtedly while others have increased very few times.
have a positive impact on General Santos Citys Inflation from 1998 to 2014 has seen prices in the
local economy, improve livelihoods, and may help general economy increase by 119%, and several
alleviate the poverty situation in Mindanao. user fees are under half the rate they would be if
inflationary increases had been applied them.
The operating regime for Philippines regional
fishing ports has proven to be unsustainable. The upgrade of the fishing ports into an
Insufficient income derived through port operation internationally recognized standard is expected
fees means the ports are unable to cover their to significantly increase operational performance
growing costs as the infrastructure and buildings and sustainability; improve health, safety, hygiene,
deteriorate with use and age. In the case of and welfare; and provide a regulatory compliant
GenSan, we found revenue generation has not platform for export of trade.
been maximized, and a significant portion of
THREATS TO PORT ECONOMIC MODEL
As indicated by the decline in the other large to the industry), both of which may drive even
fishing ports in the Philippines, such as Navotas more users away. This same pattern is seen with
Fish Port, which have degraded beyond repair electric and gas utilities, hospitals, schools, roads,
and will likely need to be replaced, the current and other public-user-funded infrastructure. A
Philippine fish port economic model has not public-private partnership may offer an alternative,
proven to be financially sustainable over the especially with a well-structured concession
long term. The current regime underprices the that ensures that the private operator meet
use of public infrastructure and services by not certain performance and upkeep requirements.
indexing all port fees to inflation. As the financial Existing Environmental Infrastructure and Waste
model becomes more difficult to maintain over Management Issues
time, costs are cut, often in the form of reduced
maintenance and capital spending. This scenario The Department of Natural Resources and
can lead to a public utility death spiral, whereby Environment (DENR) penalized GenSan in 2012
the degradation of facilities drives users away, for violating antipollution provisions under the
24 which further reduces the fee base and revenues, Philippine Clean Water Act of 2004, due to
while the capital and operating costs of holding inadequate wastewater treatment and fish waste
a long-lived infrastructure asset hold steady. The disposal. To date, rehabilitation and upgrading
result is that fewer users must support the high- of the wastewater treatment plant (WWTP) is
cost base, which leads to either continued cost ongoing and servicing of wastewater treatment
cutting on maintenance and infrastructure decline, has resumed. However, discussions related to
or to an increase in prices (absent an improvement the penalty charge are ongoing, and the current
in the value of services and port facilities provided deficiencies must be resolved.
Management is considering imposing fees on ships regular maintenance operations, and since the port
unloading wastewater to generate funds needed was first constructed these used oils and other
for maintenance and improvement of the site non-biodegradable materials have been housed
facility. Currently, such unloading and processing within the complex awaiting proper disposal.
of ships liquid waste is free of charge. However, there is currently no plan for how to
move forward.
The facility also lacks a proper disposal facility for
used oil and associated wastes generated from
CURRENT FISHERIES DATA COLLECTION AND MANAGEMENT DEFICIENCIES

The Philippines, like most of the countries in Because manual data must be re-entered as it
the WCPFC, collects fisheries information by is passed up the chain of authorities and to the
hand using paper logbooks and reporting forms. WCPFC, sometimes as many as four times, error
Onboard observers do not submit these forms levels are likely very high and the quality of the data
until the vessel returns to port after being at significantly degraded. The current system also
sea for three or more months at a time. This hinders port-based catch accounting, and only an
significantly delays the receipt of this vital estimated 10% of landings at GenSan are properly
information by fisheries managers by anywhere enumerated. This is exacerbated by inefficient
25
from six months to up to a years in some cases. landing logistics, inadequate process management
It also provides leeway for ex-post facto changes and a limited number of enumerators. Besides
to or manipulation of the data during the before it leading to inaccurate reporting of landings by
reaches authorities. species, these factors also compromise the quality
of key biological data used in stock assessments,
such as length-frequency information.
FIGURE 20: Comparison Between Municipal and Industrial Sectors
CAPTURING THE ECONOMIC BENEFIT OF THE COUNTRYS FISH
Commercial fisheries Municipal fisheries
Of the nations
top 7 species of
fish, in terms of
economic value
of the catch...
67% 33%
SOCIOECONOMIC CONTEXT
In 2012 approximately 22% of Philippine families Approximately 36% of the General Santos City
lived below the poverty line, and fishers are among and Sarangani regions population lives in coastal
the poorest, with a poverty incidence of roughly areas. Some 52% of these coastal families engage
40%, up from 35% in 2003.48 Commercial fishers directly in fishing (evenly split between commercial
and aquaculture farmers receive the majority of and small-scale), while another 40% are involved
the economic benefits from the countrys fish in related occupations such as fish vending, boat
production, while small-scale nearshore fishers making and bait gathering.52
are the most disadvantaged. The commercial
sector, which includes the vessels landing product While roughly 22% of Philippine families live below
at GenSan, has grown as a proportion of total the poverty line, fishers are among the societys
catch over time, and commercial and aquaculture poorest, with a poverty incidence of over 40%.43
fisheries production has surpassed that of municipal General Santos City is relatively prosperous, with
fisheries, which averaged 70% of total Philippine the second lowest poverty incidence in Mindanao
production in the 1950s. 49

Today, commercial fishers at 14%; however, the greater Sarangani region falls
harvest 67%, of landings among the seven top well below the national average, with 39% of families
species caught by both sectors, while municipal living in poverty, and 19% living at subsistence levels.
fishers account just for 33% (Figure 20).50

The literacy rate in General Santos City grew from
With the rapid growth of its agriculture and fishing just 31% in 1960 to 96% in 1990, and almost 44%
industry, General Santos City grew from a population of the labor force holds at least a secondary level
of 86,000 in 1970 to nearly 600,000 in 2015. The of education.44 While being among the poorest
demographic that makes up this population is segment of the population, most municipal fishers
skewed very young, with 92% under the age of 55, are literate and 67% have achieved at least a primary
and 40% between the ages of 20 and 44. Half of the education, 13% have at least some secondary
population is younger than 19.51 education, and 9% have graduated high school.45
26
48
Rosal, Riza. Fisheries, Coastal Resources and Livelihoods Project (FishCORAL), Design Completion Report. (n.d.): n. pag. 30 July 2014. Web.
49
S. J. Green, et al., Philippine Fisheries in Crisis: A Framework for Management, 2003, Philippines, p. 33 [hereinafter Green], available at:
http://oneocean.org/download/db_files/philippine_fisheries_in_crisis.pdf.
50
S. J. Green, et al., Philippine Fisheries in Crisis: A Framework for Management, 2003, Philippines, p. 33 [hereinafter Green], available at:
http://oneocean.org/download/db_files/philippine_fisheries_in_crisis.pdf.
51
Philippine Statistics Authority, General Santos City: Annual Population Growth Rate Remained at Five Percent, June 20, 2002.
52
C. R. D. Cadiz and Rasid Bani, Impact of Coastal Resource Management Initiatives to the Community: The Saranggani Bangsa Moro
Affiliates (SBMA) Experience. Nature Exploitation and Protection in Mindanao. Social Watch Philippines, pp. 98104.
53
Riza Rosal, Fisheries, Coastal Resources and Livelihoods Project (FishCORAL), Design Completion Report (n.d.): n. pag., July 30, 2014, Web.
54
C. R. D. Cadiz and Rasid Bani, Impact of Coastal Resource Management Initiatives to the Community: The Saranggani Bangsa Moro
Affiliates (SBMA) Experience. Nature Exploitation and Protection in Mindanao. Social Watch Philippines, pp. 98104.
55
Riza Rosal, Fisheries, Coastal Resources and Livelihoods Project (FishCORAL), Design Completion Report (n.d.): n. pag., July 30, 2014, Web.
THE NEXUS BLUE IMPACT STRATEGY
T he Nexus Blue Strategys fundamental objective is to dramatically improve the Fisheries Information
Management System (FIMS) utilized in the Philippines tuna fishery to better track fishing activity, landings,
bycatch, and discards, creating a rich data set for use in fisheries management activities such as stock
assessment modeling, IUU enforcement, and policy development, and providing the necessary foundation for
protecting and restoring stocks of globally important fisheries. Nexus Blue proposes to achieve this goal by
attracting private investors to support a public-private partnership project that combines an investment into the
FIMS with investment into the operation and rehabilitation of the General Santos Fish Port Complex.
The high quality data stream provided by the FIMS would support Philippine fisheries authorities in the
provision of more accurate and timely data to the Western and Central Pacific Fisheries Commission
(WCPFC) to inform its regulation and management of tuna stocks across the region. Moreover, a robust
information management infrastructure, initially financed by the high value tuna trade at the GenSan, can
serve as a platform for the expansion of the system to support other important fisheries in the Philippines.
With the core system in place, the addition of incremental monitoring and data collection for other vessels
and stocks such as the sardines, mackerels, and scads, can achieve implementation at lower cost.
IMPACT INVESTMENT THESIS

By combining the two complementary components of a FIMS and fish port investments into a single PPP
program, Nexus Blue can generate relatively stable, predictable cash flows to support investor returns,
while enabling the management improvements required to improve the long-term health of the fish stocks
and landings that drive product throughput, and revenue. In turn, the strategy aims to catalyze better
fisheries management in the Philippines and across the region, as the innovative financing structure for a
high-quality data management solution offers a replicable model for fisheries management improvements,
and economies of scale will drive down adoption costs for subsequent, commercially less valuable fisheries.
In addition, the positive network effects of including more vessels and fisheries will increase the quality and
value of the system for all users.
To accomplish these objectives, Nexus Blue proposes a PPP with the Philippines government with the
following two components:
Step 1: Upon establishing a project company SPV (NexusCo), invest $2.1 million into a subsidiary
of NexusCo (referred to hereafter as FIMSCo), which will be dedicated to the development and
implementation of a comprehensive FIMS. The FIMS will have two interdependent components: (1) At sea,
On-the-Water IT infrastructure and tools for data collection, monitoring, traceability, and enforcement;
and (2) Port-Based IT Infrastructure and tools for catch accounting, market transparency/efficiency,
27 traceability, and enforcement.
Step 2: Simultaneously invest $30.6 million into a second subsidiary of NexusCo, referred to as PortCo,
which will be responsible for port infrastructure renovations and long-term operations of the General
Santos Fish Port Complex. Specifically, this will restore the port to the environmental, safety, sanitation
and food safety standards that it was originally designed to meet, increase the efficiency and quality of
operations, logistics, post-harvest services (processing and cold storage facilities) and market activities, to
the benefit of GenSans users. In addition, management and operational efficiencies promise to put GenSan
back on a path to financial viability, and establish it as a world-class operation that can serve as a model
throughout the region.
FIGURE 21: The Nexus Blue Strategys Investments
NATIONAL-SCALE FISHERIES SEAFOOD SUPPLY CHAIN

COLD CHAIN/
HARVEST HANDLING TRANSPORT PROCESSING DISTRIBUTION
STEP 1: Fund $2.1 million in FIMS Infrastructure, Development and Implementation
STEP 2: Fund $30.6 million to Refurbish, Upgrade

and Operate the GenSan Port Facilities
By bundling the FIMSCo activities and investments operations and supply chain efficiency; and
with the PortCo as a port-based PPP, the operator (3) promoting the rapid deployment of EM/
is positioned at a key gateway in the supply chain ER technology to capture the data needed by
between the regulators and the regulated as a regulators for monitoring, control and surveillance
neutral intermediary. The complementary nature (MCS) and fisheries science. The combination
of hard infrastructure and fisheries IT investments of technology deployment and value-added
will address the needs of the Philippines Amended improvements at GenSan will in turn build support
Fisheries Law, while simultaneously: (1) shifting the for, or at least acceptance of activities required
financial compliance burden of VMS requirements under the Amended Fisheries Law on the part
from fishers; (2) adding value to industry by of industry, which to date has represented a key
improving and maintaining high-quality industry barrier to reform.
TARGETED SOCIAL AND ENVIRONMENTAL IMPACTS

The table below sets forth selected impact targets for the Nexus Blue Strategy:
Fisheries Provide monitoring and data collection for 429 vessels in the tuna fleet, covering 100% of
Management General Santos based vessels of greater than 3 gt, and covering approximately 60% of tuna
Improvement landings in the Philippine tuna fisheries.
Outcomes Reduce time of data transmission from onboard observers and vessel logs to the BFAR and
and Impacts WCPFC within minutes and hours as opposed to several months to up to a year currently.
Improve catch accounting coverage from the current 10% to over 70%, and increase the
quality of data provided.
Achieve electronic monitoring and reporting coverage on 7.5% of vessels registered in the
WCPFC, representing ~5.0% of tuna landings and ~12.5% of total tuna product throughput in
the WCPFC (including frozen imports delivered to GenSan).
28 By covering upfront software development and testing costs, catalyze the expansion of
the FIMS framework to other commercially important stocks such as sardines, as costs will
continue to fall system achieves larger scale.

Provide the data required for development and ongoing evaluation of science based catch limits.
Support Improve fisher productivity by saving an average of 2.5 to 4 days of labor annually per vessel
Fisher due to easier data entry, representing between 1,100 and 1,700 days saved per year among
Livelihoods GenSan vessels.
Achieve higher value for product through traceability and improved market access.
Improved crew welfare by enabling email communication and internet access while at sea
for months at a time.
Improved enforcement of slave fishing and child labor practices.
Protect small-scale, nearshore community fisheries by encroachment and poaching by illegal vessels.
STEP 1: THE FISHERY INFORMATION MANAGEMENT SYSTEM (FIMS)
We first engaged with subject matter experts to We finally compared these possible combinations of
research international best-practices in fisheries features to NexusCos financial model and revenue
information technology, regional and international streams to select the strongest possible financially
standards on IUU, VMS, traceability and catch viable option for a Fishery Information Management
reporting, state-of-the-art technologies and trends, System (FIMS) for the GenSan tuna fisheries.
and recommendations made in the European
Commissions yellow card report. Based on these The selected FIMS model includes both a vessel-
findings, we analyzed various combinations of based and portside component to deploy electronic
data management interventions across a range of monitoring and reporting technology (e.g., VMS
scale and scope in order to (at a minimum) achieve and e-logs) on 429 vessels,56 and creates a data
compliance with the EU requirements to avoid trade management center located at GenSan, with
sanctions and the Amended Fisheries Law, while also increased dockside monitoring, e-reporting and data
weighing the costs and benefits of even more robust, management at the port. Figure 22 outlines the core
comprehensive and technologically advanced options. technical sub-components of the NexusBlue FIMS
PPP Component.
FIGURE 22: Components of a comprehensive FIMS PPP component under the Nexus Blue strategy
Vessel-Based FIMS Components
Electronic logbooks Provides electronic reporting (ER) of harvest, fishing effort and bycatch data.
(e-logs) for Vessel Replaces the current paper-based logs found on most of the Philippines fishing fleet,
Operators: using either a laptop or tablet computer installed in the wheelhouse of the vessel.
Passes data to a centralized on-shore data management system via the satellite link
used by the VMS system.
A variety of systems are commercially available and many can be customized to the
needs of the fishery.
Vessel monitoring Provides electronic monitoring (EM) of the vessels position to support MCS activities.
system (VMS): Passes data to a centralized on-shore data management system via a satellite link on
which other data (including e-log and crew welfare data) may piggyback.
A variety of systems are commercially available and many can be customized to the
needs of the fisherya variety of sensors may be deployed that link to the VMS to
capture (and transmit) a wide range of data including:
Vessel position (GPS data) Hold temperature

Net deployment Flow scale data
Fishing activity Engine/speed data
Electronic logbooks Provides ER of observer logs.

for fish observers: Replaces the current paper based logs currently used by the Fish Observer Program.
Tablet computer to allow real time data capture.
Passes data to a centralized on-shore data management system via the satellite link
29 used by the VMS system.
A variety of systems are commercially available, and many can be customized to the
needs of the fishery.
Real time Links the vessel data to the on-shore, centralized data management system.
communications Satellite is preferred because it ensures full coverage, irrespective of the vessels
with central data distance from shore.
management center:
Port operator maintains the bulk contract with the satellite provider to
achieve economies of scale and reduce costs.
56
This is the total number of vessels for which VMS is required (over 3 gt in size) that currently do not have systems installed.
Port-Based FIMS Components
Installation of A data center located at the port (or possibly off-site) including a server, data
central data terminals, software and internet connection.
management A cloud database to back up the data center and support integration with
system: government third-party databases, as well as public access.
Receives real-time data directly from vessels and other data capture
technologies deployed.
We would use existing technology, and the data center can be constructed using
off-the-shelf components.
Real time Data center receives and stores all transmitted data from vessel e-logs and VMS.
communications w/ Each vessel has unique identification number that stays with all records managed in
vessels and fishery the system.
managers:
Full time data Full-time port staff in charge of ensuring that data from vessels and port activities is
managers: received and input into the system.
Oversee the various monitoring and auditing activities to ensure data integrity.
Report results to fishery managers in Manila.
Oversee team of enumerators and monitors (including video catch data auditors) to
increase the polling of catch.
Port-based A cadre of full-time enumerators poll landings to provide landing data that is used to
enumerators, video verify vessel e-logs.
auditors, and e-catch Independent subset of enumerators are charged with auditing and monitoring video
accounting tools: recordings of catch offloadings from vessels
In place of the current paper-based system, enumerators use tablets (in waterproof
casing) to gather data, which is transmitted via wi-fi to the data center as landings
are polled.
Connectivity to key Data center feeds information to relevant government databases in real-time.
govt databases:
VMS position data is provided to BFAR, MARINA and the Coast Guard in real-time to
support MCS activities.
Data should be encrypted, and the system designed to protect commercially
sensitive information.
Data management standards (e.g. data fields and reporting standards). Must be
tailored to feed into the recipient database.
Connectivity to Data center feeds information to relevant RFMO databases in real time.
RFMOs: Data should be encrypted, and the system designed to protect commercially
30
Data management standards (e.g. data fields and reporting standards). Must be
tailored to feed into the recipient database.
Public access of Data center feeds non-confidential information to a publicly accessible database
non-confidential maintained by the port operator or a third party.
fisheries data: Data should be encrypted, and the system designed to protect commercially
This solution offers standalone eLog electronic onboard or alternatively from a standalone GPS
reporting (ER) software deployed using various capable device.
devices onboard vessels to collect required fisheries
data. Unlike a web-based solution, standalone This option can replace or complement existing
software does not require the user to be online to catch and effort reporting paper forms in digital
use the system, which is a major advantage of this format, saving a significant amount of time for
technology. However, the device will transmit data in users and fisheries managers, and ensuring timely
real-time while at sea when the device is connected sharing of data with relevant authorities. Studies of
to the internet via a satellite link or GSM Network. eLog solutions in the Hawaiian longline fleet have
shown that eLog reporting can save up to 4 days
The eLog application allows users to enter data per year in labor per vessel. In addition, studies
through a device interface, and to generate reports have shown that paper-based data from vessel
for submission. The software is customizable to logs, onboard observers, and catch enumerators
meet the requirements of the FMC for a particular must be re-entered up to four different times
fishery: for example, the FMC can specify the before it is received by BFAR, and the process can
fields that are mandatory, if any fields are optional, take from several months to a year. This places a
the transmission system(s) to be used, the data significant limit on the ability of fishery managers
format, and so on. Reports generated by eLogs to actively manage the resource, and in many
can include vessel-tracking data that specifies cases the data is so degraded that it is not useful.
the location and time/date stamps of the fishing Figures 23 and 24 provide a visual representation
activities. Tracking data is collected through the of how vessel-based monitoring and reporting
existing mandatory VMS equipment installed links to port-based data management.
FIGURE 23: Vessel-Based Electronic Monitoring (VMS) and Electronic Reporting (eLog)
Vessel Based EM/ER

COMMUNICATIONS VMS OPTIONS
connect VMS and e-logs GPS tracking
via satellite fishing activities
crew welfare fuel consumption
(e-mail) hold temperature
ELECTRONIC LOGBOOK OBSERVER DATA OPTIONS

31 replaced paper e-log
logbook real time
real time data
data transmission
collection
high ease of use
FLOW SCALES
improved catch accuracy
connect to VMS and e-log system
FIGURE 24: Port-Based Electronic Catch Accounting and Data Management
Port Based Data Management
GENERAL SANTOS FISH PORT COMPLEX Satellite communications ensure that

data can be transmitted without delay
Electronic logging systems

Vessel data is transmitted in replace the current paper based
near real time to centralized catch accounting system
data management center
located at the GSFPC
More enumerators are hired

and trained to ensure that port
monitoring occurs each day and
at scientifically sound levels On site data managers
ensure data integrity
The project database feeds into national

and regional RFMO databases to assist
fishery managers and scientists Data is
captured in an
on site server
collected to a
Public access permits researchers
secure cloud
and interest groups to perform
database
independent analysis of the
collected data
Source: Frontier Law and Advisory, 2015.

FISHERIES MANAGEMENT INFORMATION SYSTEM BUDGET
The FIMS budget is characterized by one-time two full-time data managers, operating overhead,
capital investment in software development, and maintenance of hardware and software
development of a port-based data center, catch components. The largest contributor to operating
accounting tablets and other hardware, and vessel- expenses, however, is the annual satellite data
based eLog and VMS hardware deployed on 429 subscription per vessel and software licenses, which
32 vessels (Figure 25). together comprise 84% of total operating costs.
Projected operating costs remain relatively constant
Operating expenses include 8 full-time enumerators over the life of the project, increasing with inflation
hired to exclusively cover GenSan, as well as staff to over time (Figures 26 and 27).
train and oversee the deployment of technologies,
FIGURE 25: FIMS Capex Budget by Category
FIMS CAPITAL EXPENDITURE BY CATEGORY
6%
8%
Software
49%
Development
VMS/Elog hardware
37% (GPS, Sat link)
VMS/Elog installation
Data Center
Total FIMS Capex: $2,068,050
FIGURE 26: FIMS Total Operating Expense Contribution Over the Project Life
FIMS YEAR 1 OPERATING EXPENSES BY CATEGORY

5%
Satellite data
11% subscription
Software
license/vessel
48%
Port Data
Operations
33
36% VMS/Data Center
Maintenance
Year 1 FIMS Opex: $596,623

FIGURE 27: Capital Expenditures and Operating Expenses Over the Projects 35-Year Life
FIMS BUDGET OVER PROJECT LIFE
2,500 FIMS Capital

Expenditures
2,000 FIMS Operating
USD (thousands)
Expenses
1,500
1,000
500
YEAR 01 03 05 07 09 11 13 15 17 19 21 23 25 27 29 31 33
STEP 2: PORT REFURBISHMENT AND OPERATIONS
The port component of the combined PPP provides The port operation would assume the following
a physical hub, around which the FIMS infrastructure obligations aimed to support the conservation
can be deployed and managed. Because it serves goals of Nexus Blue:
as a natural gateway in the supply chain, the
Educate fishers on the importance of data
port represents a nexus for sustainable change
collection and management for achieving
that is literally embedded in a critical point in the
sustainable fish populations
infrastructure through which all products must
pass. It therefore offers a platform to the fishing Finance, deploy, and maintain the FIMS
companies and fishers whose cooperation is needed technology on vessels and at the port
to successfully deploy a data-based sustainability Finance, install, and maintain a centralized data
project. The port can provide a variety of services for management system to handle all data recorded
fishers to garner such cooperation, including: from the FIMS PPP Component, preserving
Dissemination of information commercially sensitive (confidential) data
Access to social services Give fishery managers (especially BFAR)

accurate, timely, and verifiable data upon which
Bearing the cost of VMS systems required by the
to make better policy decisions
Amended Fisheries Law
Improve handling conditions on landing to
Provision of more ice than is currently available
reduce post-harvest loss and improve quality at
(possibly even at lower prices)
time of salethus giving back to fishers more
34 Better handling of fish to improve quality at time value for the same amount of catch
of sale and thus better pricing for the fishers
Provide better cold storage at the port so that

Assistance in marketing GenSan branded fish to vessels with poorer handling conditions do not
international markets, aimed at increasing the need to hold fish offshore awaiting better pricing
value of the catch (which is a contributor to post-harvest loss)
Provide better information on market conditions

By structuring the Nexus Blue Strategy as a
and create a more transparent pricing system
port-based PPP, actions needed for a transition
to sustainability can be shifted from fisherswho To engage them in the process of protecting their
may lack the resources and motivation to bear own fishing grounds, give feedback to fishers in
such obligationsonto port operators as output the form of data and analysis of the information
specifications required under the concession. obtained through the FIMS PPP component
FISHERIES PORT PPP FEATURES
FIGURE 28: Key Features of the Fishing Port Infrastructure Components of the PPP
Project structure: Design and construction of new facilities

Upgrade existing facilities
Operation and maintenance of fishing port
Existing staff automatically transfer into PPP
Implementing Agency: Department of Transportation and Communications (DOTC)
Management Agency: Philipppine Fisheries Development Authority (PFDA)
33-year investment term (3-year construction period; 30-year operating concession)
The Port PPP will likely be implemented via a build-operate-transfer (BOT), a
build-transfer-operate (BTO), or a develop-operate-transfer (DOT) contract
Contractual structure can be flexible depending on the needs of the program and
linkage to future projects
Development Landing
areas: Storage
Marketing
Maintenance
Infrastructure
Distributed power generation
Methodology: Meet Philippines Fishing Port Design and Operation standards

Meet appropriate International Design and Operation standards
Use a methodology appropriate to the Philippines and easily replicable
Role of private Design, build, finance, operate, and maintain the fishing port
sector: Operator directly hires existing staff located at the port and recruits any additional
staff for the duration of the PPP
Innovations: Solar power as an alternative energy source for the port

Modular freezing facilities
Upgrading facilities to internationally-recognized design standards
State-of-the-art catch accounting technologies deployed on all vessels and throughout
port operations
Expansion, The Nexus Blue Strategy is based on GenSan, but is not necessarily location or project
replicability, scale: specific; GenSan would serve as a template to allow replication in other ports both
regionally and globally
Revenue source: Mainly from the operations revenue stream of the port
Alternative sources of funds (including grants, PRIs and guarantees) should be
considered in case of the need for a minimum revenue guarantee or viability
gap funding
35
Areas for further Full technical feasibility study is needed
study and A bottom up analysis of demand, cost, and revenue is needed

refinement:
Interest level of BFAR, PFDA, potential partners, and the broader market
must be assessed
GENERAL SANTOS PORT INFRASTRUCTURE AND OPERATIONS BUDGET
The PortCo budget includes an initial capital be phased in during a development period of
investment in cold storage and processing three years, with 33.3% of capex allocated in
facilities, wastewater treatment, administrative each year. Operations expenses are comprised of
infrastructure, general port repairs and upgrades, maintenance of port facilities, labor, supplies and
and 2.4 MW in installed solar power generating equipment, and solar power operations.
capacity (Figure 29). This initial capex would
FIGURE 29: Port Infrastructure Capital Expenditures
DESCRIPTION ESTIMATED COST57
Replace and increase number of cold storage facilities $23,498,627
Replace main office building, port manager and staff house 223,160
Replace waste water treatment plants 2,613,831
Replace and / or repair existing port infrastructure58 1,019,667
Installation of solar panels (2.4 MW capacity) 3,249,678
Total Port Infrastructure CapEx $30,604,963
FIGURE 30: PortCo Capital Expenditures and Operating Expenses Over Project Life
PORTCO CAPITAL VS. OPERATING EXPENSES
14,000 PortCo Capital

Expenditure
12,000
PortCo
USD (thousands)
10,000 Operating
8,000
Expenses
6,000
4,000
2,000
36 YEAR 01 03 05 07 09 11 13 15 17 19 21 23 25 27 29 31 33
57
Cost estimates were provided by DCCD, a local engineering firm.
58
These items include access roads, water supply distribution system, waste water and sewage, fire protection system,
drainage, power and security system.
THE NEXUS BLUE STRATEGY FINANCIAL ASSUMPTIONS AND DRIVERS
N exusCos operating expenses are generated through its two primary investments into data
management, through its FIMSCo subsidiary, and port operations at the General Santos Fish Port
Complex through the PortCo subsidiary, over an assumed 33-year project life. Because governments
generally require PPP revenue projections to be based on predictable, proven, relatively low-risk sources of
revenue that can be built into a concession or partnership agreement, the only revenue source considered
in the present analysis is derived from established port revenue streams.
REVENUES
Revenues fall into the following categories:
Port usage fee revenue: The primary source of revenue from port user fees; fee streams include the
current port user fee revenue across a number of categories such as royalties, wharfage, market operations,
brokerage, ice sales, unloading, and other facilities. This is currently the primary source of revenue for
GenSan, and will remain so under the assumed base case. However, this will also include the effects of tariff
rebasing to compensate for the failure to account for inflation in pricing since the port was opened, as well
as improvements to facilities justifying fee increases over time.
Base rental revenue (market, agri-industrial /commercial and cold-storage): These are the revenues
currently being generated from the leasing of existing processing, cold storage, agri-industrial and market
facilities. Under the base case, we assume an increase of 10% per year beginning in Year 4, after port
infrastructure upgrades are completed and operations improved. This will continue to increase at 10% per
year through Year 8 as a catch-up for the failure to index costs to inflation since the port was opened in 1998.
This also assumes increased occupancy of the existing agri-industrial land to 90% of the available area and
improved collection of lease revenues achieved through improved administrative and managerial operations.
Increased throughput: Under the current system, there is likely significant underreporting of product
throughput at GenSan, which depresses revenues to the port operators. With the investment in improved
data capture and electronic reporting, this should improve significantly. In addition, we estimate that over
the long run, FIMS will allow fish stocks to replenish through improved management interventions. While
this analysis would need to be expanded as part of a full technical feasibility study, we have assumed here
that these drivers would result in a 10% increase in reported landings compared with 2014. This category
37
accounts for the incremental revenue generated by this increased product throughput.
Solar revenues: Revenues generated from the sale of power to the local utility from 2.4 MW installed solar
panel capacity, assuming a capacity factor of 17% and a feed in tariff of $0.19 per kWh.
On the following page, Figure 31 highlights the revenues generated over the 33-year life of the project, broken
down by category.
FIGURE 31: NexusCo Revenues by Category Over 33-Year Project Life
ANNUAL REVENUES (USD)
25,000 Solar Revenues
20,000
Increased
USD (thousands)
Throughput Fees
15,000 Port Usage Fee

Revenue
10,000 Agro-Industrial
Commercial
5,000
Rental
Freezer & Cold

Storage
YEAR 01 03 05 07 09 11 13 15 17 19 21 23 25 27 29 31 33 Market Rental
OPERATING EXPENSES
Operating expenses from both the PortCo and 52.4% of the port upgrade capex, and include all
FIMSCo subsidiaries include: fixed infrastructure such as buildings, market halls,
landing facilities and other fixtures.
Equipment maintenance costs: Assumed flat
rate of 2.0% per annum on capex associated with Labor, supplies and materials costs: 0.8% per
machinery and equipment, principally cold storage annum of the current personnel costs ($835,200 in
and processing facilities, with inflation applied. The 2014) with Inflation applied.
mechanical works are assumed to be approximately
38 Solar operating costs: Based on a standard rule
48.0% of the total port upgrade capex. This 2.0%
of thumb of 2.0% per annum of solar capex with
is a common rule-of-thumb applied to major

infrastructure maintenance before detailed technical inflation applied.
feasibility studies can be undertaken.

Fisheries Information Management System:
Fixed infrastructure and buildings maintenance: Assumed to be 1.0% per annum of FIMS capex with
Based on a rule-of thumb for so-called civil inflation applied, based on interviews with subject
maintenance of 0.8% per annum of the civil works matter experts.
component of the port upgrade capex with

Figure 32 highlights the operating expenses
inflation applied. The civil works are assumed to be
generated over the 33-year life of the full project.
FIGURE 32: NexusCo Overall Operating Expenses and Capital Expenditure Over 33-Year Project Life
NEXUSCO PPP CAPITAL AND OPERATING EXPENSES
16,000 Total NexusCo

PPP Capital
14,000
Expenditure
USD (thousands)
12,000

8,000
PPP Operating
Expenses
6,000
4,000
2,000
YEAR 01 03 05 07 09 11 13 15 17 19 21 23 25 27 29 31 33
The previous assumptions yield the following profile of operating revenue and expenditures over the life of
the project (Figure 33).
FIGURE 33: Operating Expenses and Revenues Over Nexus Blue Project Period
NEXUSCO PPP REVENUE AND OPERATING EXPENSES

16,000 PPP Operating
14,000 Expenses
USD (thousands)
12,000
Total NexusCo
10,000
PPP Revenue
8,000
6,000
4,000
2,000
YEAR 01 03 05 07 09 11 13 15 17 19 21 23 25 27 29 31 33
39 BALANCE SHEET ASSUMPTIONS

This project entails an upgrade of an existing Due to this, we made a number of assumptions on
port and includes the transfer of the existing the opening balance sheet. GenSan was upgraded
port operations, assets, and liabilities to the in 2007, financed by a $26.0 million loan from
concessionaire. However, a major constraint at this the Chinese government, for which debt service
point in the analysis that we have not been able to is forthcoming. This loan will be assumed by
receive the full, updated financial reporting from NexusCo and serviced from project cash flows.
existing operations, including a balance sheet from No other existing loan obligations are assumed
the PFDA, which currently operates GenSan. in the model. As the $26.0 million loan is the only
indication of the value of existing assets we have
on this port, we assumed a balance sheet with
operating assets of $26.0 million.
THE NEXUS BLUE TRANSACTION STRUCTURE
SOURCES AND USES OF FUNDS

The sources of funds for the Nexus Blue PPP investment under the base case include an assumed
government subsidy of $5.9 million, in order to achieve the 15.0% blended IRR hurdle required by the
Philippines government for a PPP of this nature (Refer to Annex B for more detail on the Philippines PPP
legislation and process). The base case assumes $12.9 million in senior, non-recourse debt, denominated
in the local currency, likely from a commercial bank. For PPPs with non-recourse project debt, the project
sponsor generally contributes subordinated junior debt and/or hybrid equity (such as preferred shares).
This is assumed to be $7.1 million under the base case, with sponsors financing an additional $1.8 million in
common equity. Finally, excess cash generated from GenSans ongoing operations during the construction
period is assumed to fund the remaining $6.4 million under the base case. The uses of funds under the base
case assume $700,000 in transaction costs and financing fees, $650,000 of interest during construction,
$2.1 million in FIMS capex, $27.4 million in infrastructure upgrades to the existing port and $3.2 million
to fund the installation of 2.4 MW of solar power generation capacity. The sources and uses of funds are
outlined in Figure 34.
FIGURE 34: Sources and Uses of Funds

SOURCES OF USES OF
INVESTMENT PROCEEDS USD $ % INVESTMENT PROCEEDS USD $ %
Senior Project Debt $12,878,545 37.8% Transaction Costs & Fees $712,207 2.1%
Junior Debt (Sponsor) 7,076,205 20.8% Interest During Construction $648,666 1.9%
Common Equity (Sponsor) 1,769,051 5.2% FIMS Capex 2,068,050 6.1%
Government Subsidy 5,871,899 17.3% Port Infrastructure Upgrades 27,355,284 80.4%

40 Excess Cash 6,438,185 18.9% 2.4 MW Solar 3,249,678 9.5%
from Operations Generation Capacity
Total $34,033,885 100.0% Total $34,033,885 100.0%

STRUCTURE AND GOVERNANCE
The Nexus Blue transaction structure follows an public sector at the end of the 30-year operating
established PPP project finance arrangement, in concession. NexusCo issues non-recourse project
which an SPV (NexusCo) is created as the project debt secured by the predictability and stability of
company, funded by equity investment and junior long-term cash flows under the concession. The
debt by the project sponsor. The sponsor is generally indicative transaction structure also assumes a loan
a consortium of investors and project developers. guaranty provided by either a development finance
The government grants a concession to NexusCo to institution (DFI) or the Philippine government. The
refurbish, build, operate and maintain the IT and port NexusCo project company has two subsidiaries
infrastructure in exchange for revenues in the form of under the envisioned structure, PortCo and FIMSCo,
fees, rentals, and services provided by the facility. In to allow for the possibility of attracting grant capital
the case of a joint-venture-type PPP, the government or subsidies for the FIMS portion of the investment,
will commit equity and share in the project cash as this does not generate revenue under the base-
flows, and ownership will transfer back to the case model (Figure 35).
FIGURE 35: Nexus Blue Public-Private Partnership Transaction Structure
FINANCIAL SPONSORS
PUBLIC SECTOR SPONSOR
(CONSORTIUM)
Impact Local Project Intl Project Implementing Ministry of
NEDA
Investors Developers Developers Agency Finance
30-year
Common Dividends Common Equity operating Sharing of revenue or cash flow*
Preferred Dividends Hybrid Equity concession Asset Ownership at End of
Junior Debt Service Mezzanine Debt Equity Concession Term
(JV only)
SENIOR DEBT
PROJECT COMPANY (SPV) GUARANTORS
PROVIDERS Senior Project Project Debt
Debt Guaranty
Commercial
Lenders NexusCo DFIs
DFIs
FIMSCo PortCo
(Data Management) (Infrastructure & Operations)
National
Financial Senior Debt Guaranty Fee Government
Institutions Service
Investment to Build,
Operate & Maintain User Fee &
Facilities Rental Revenue
FACILITIES
FIMS Data Management Port Infrastructure & Operations
Landing Environmental
Data Collection Traceability Infrastructure & Sanitation
41
Catch Accounting Chain of Vessel Cargo Waste Sewage

Database Custody Landing Unloading Recycling Treatment
Monitoring & Post-Harvest

Compliance Implementation Infrastructure Market
*Revenue sharing with the

VMS CDS Outsource and Cold Processing Market government may be relevant
manage Storage Operations for certain transactions or in
implementation the event of a joint-venture.
ANALYSIS OF FINANCIAL RETURNS
T o evaluate the project financial returns and viability as a PPP in the Philippines, we calculated the
following return metrics:
Project Internal Rate of Return (Unlevered IRR): Project IRR on the basis of the total free cash flow,
including returns to all capital providers including debt and equity.
Sponsor IRR (Blended IRR): The sponsor IRR of a SPV under a PPP structure considers that the sponsors
are generally expected to commit junior or mezzanine debt to the capital structure in addition to their
equity investment. The blended IRR accounts for the multiple types of securities that project sponsors
invest into an SPV such as NexusCo, and the interest, repayment and dividends received by sponsors after
repayment of senior commercial bank debt service.
Viability Gap Funding (VGF): A subsidy provided by the government to support infrastructure projects
that are economically justified from a societal perspective, but fall short of the target sponsor blended IRR
established by the government. In our model, the VGF is calculated as the capex subsidy that is required
to yield a target sponsor IRR of 15.0%, which is the minimum threshold that the Philippines government
generally requires before it will submit a project for public bidding (Refer to Annex B for more detail on the
Philippines PPP legislation and process).
42
SUMMARY OF RETURNS
As indicated in Figure 36, the project currently the gap to the 15.0% return hurdle. Therefore, PPP
yields a 12.4% blended return to sponsors, or JV structures that allow a VGF subsidy must
which falls below the unofficial government be considered in order to ensure that the project
return hurdle of 15%. This means that under the is bankable. However, it is important to note that
current assumptions, the project will need to be the assumptions made for the purposes of this
structured with viability gap funding (VGF) from analysis were quite conservative due to the high-
the government partner. This is an established level nature of the pre-feasibility study. We believe
structure used by many socially beneficial PPPs, that a detailed technical feasibility study would
but requires a social cost-benefit justification. A likely indicate a more attractive return profile and
calculation of the required VGF indicates that a achieve the 15.0% threshold without requiring a
subsidy of $5.9 million would be required to close government subsidy or other VGF funding.
FIGURE 36: Summary of Returns
SUMMARY OF BASE CASE FINANCIAL RETURNS
Sponsor blended IRR (excluding govt subsidy) 12.4%
Sponsor blended IRR (including govt subsidy) 15.0%
Project unlevered after-tax IRR 15.1%
Required government subsidy to arrive at 15% sponsor IRR $5.9m
FREE CASH FLOW
15,000
10,000
USD (thousands)
5,000
-5,000
-10,000
YEAR 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34
43
SENSITIVITY ANALYSIS
The effects of several key inputs on the financial case, and a 20% decrease in the upside case. Under
return of the project have been forecasted here the downside scenario, IRR falls to 11.9%, with a
in various sensitivity scenarios. Each illustrative required subsidy of $6.4 million. In the upside case,
scenario is generated by flexing one of the IRR increases to 12.7%, and the subsidy required to
following key variables: achieve a 15.0% blended IRR is $5.3 million.
Revenues: The revenues of the project are Capital Expenditures: Capital expenditures in
generated in part based on contributions from the strategy consist of facility restoration and
equipment and facility rental, port user fees, construction, and solar panel installation. Costs of
unloading fees, and a range of other income these expenditures may vary, and their increase
generating activities for the port. If these revenues or decrease affects the projects IRR. Downside
fluctuate from forecasted levels, there is a possibly case capital expenditures are 20% higher than in
significant effect on IRR and required subsidy. the base case, and result in a 10.3% blended IRR,
With base case revenue assumptions, sponsor IRR which translates to a required subsidy of $12.0
is 12.4%, with a required subsidy of $5.9 million million to meet the 15.0% threshold. Expenditures
to achieve the 15.0% blended IRR hurdle. In the are assumed to be 20% lower in the upside case,
downside case, we assume a revenue haircut of which increases the blended IRR to 15.1%, which
-20.0% over the life of the project, and in this implies a subsidy of -$0.2 million at the 15.0%
scenario the blended IRR falls to 8.2%, with a blended IRR equivalent.
required government subsidy of $15.8 million to
achieve a 15.0% blended IRR. In the upside case, Operating Expenses: Operating expenses of
we assume that revenue is increased by 20.0%, PortCo and FIMSCo represent the ongoing costs
and in this scenario, IRR is forecasted at 16.6% with of the project, including equipment maintenance,
with an implied subsidy of -$3.9 million required labor, and ongoing FIMS costs. These costs have
to achieve a 15.0% blended IRR. a small but meaningful effect on IRR, and based
on an downside assumption of 20% higher costs,
Financing Costs: Although a large portion of the blended IRR falls to 11.1%, with a required subsidy
proposed investments would be financed with of $8.5 million to achieve the 15.0% blended IRR
senior debt, the assumed interest rate and cost of hurdle. In the upside case, costs are scaled down
capital has a de minimus impact on the blended by 20%, which drives the blended IRR up to 13.6%,
IRR. The strategy assumes an interest rate on senior requiring a subsidy of $3.3 million.
debt of 6.1%, with a 20% increase in the downside
BASE CASE BLENDED IRR (excl. subsidy) 12.4%
BASE CASE GOVT SUBSIDY TO

ACHIEVE 15% TARGET IRR (millions)59 $5.9
SENSITIVITY ANALYSIS SCENARIOS BLENDED IRR BLENDED IRR GOVT SUBSIDY

(%) IMPACT @ 15% IRR
44 (percentage point ) (millions)
Base Downside Upside Downside Upside Downside Upside Downside Upside
Revenue Variance - -20.0% 20.0% 8.2% 16.6% -4.1% 4.2% $15.8 - $3.9
Senior Debt Coupon 6.1% 7.3% 4.9% 11.9% 12.7% -0.4% 0.4% $7.5 $6.2
CAPEX Variance - 20.0% -20.0% 10.3% 15.1% -2.1% 2.8% $14.3 - $0.3
OPEX Variance - 20.0% -20.0% 11.1% 13.6% -1.3% 1.2% $9.9 $3.8
59
Present value of subsidy payments made during the development period
NEXUS BLUE RISKS AND MITIGANTS
T his section presents several of the leading risk elements that will potentially affect the development and
implementation of the Nexus Blue Strategy. A robust risk identification and analysis is itself a critical
part of the Philippines PPP implementation process. However, the risk factors included here are presented
for the purpose of shaping and structuring the project to ensure that a wide spectrum of risk is considered
from the outset.
Project development risk refers to the risk during the early stages of development that a viable PPP does
not emerge from this study. These risks are generally of a third-party nature, and the key mitigation efforts
should be focused on stronger stakeholder engagement, as shown below.
RISK DESCRIPTION MITIGANTS
KEY PROJECT DEVELOPMENT RISKS
Lack of BFAR buy-in BFAR may have another Nexus Blue will launch an engagement
strategy or be supporting plan in the early stages of the project.
another approach to MCS that Also, preparations will be made to
is incompatible with the Nexus demonstrate the value of letting the PPP
Blue strategy. cover the cost of MCS at GenSan on a
pilot basis for a greater MCS scheme,
where the FIMS PPP seeks to pay for
itself.
Lack of PFDA buy-in PFDA may resist privatizing port Nexus Blue will launch an engagement
operations and may not wish to plan in the early stages of the project and
relinquish control. will consider a joint venture approach to
engage PFDA as an ongoing participant
in the port operations.
Resistance from fishers Fear of monitoring and Nexus Blue will seek to engage fishers
surveillance may lead to early with a campaign showing how FIMS
resistance to participating in PPP takes the direct financial burden of
FIMS PPP scheme. compliance with the Amended Fisheries
Act off their shoulders. A parallel
campaign can engage fishers in the

conservation of fish stock (i.e., owning
their waters).
Failure to find funding for Delay in commencing feasibility There are possible structures to
feasibility study costs study to the point where the incentivize a private sector developer
project is rendered irrelevant. to join the project earlier during the
feasibility study phase, rather than wait
for this project to be bid out. A funder
45
and stakeholder engagement plan in
the months following this study is also
possible.
BFAR develops a Competing project renders the Engagement with BFAR immediately.
competing project with FIMS PPP Component irrelevant. Demonstrating the value of shifting
another partner FIMS and MCS costs off fishers or the
government budget will also mitigate this
risk.
Decreased port demand Fewer fishers than expected may The project can be structured as a joint
use the port, causing it to be venture with government to incentivize
financially unviable. support in the case of lower demand.
RISK DESCRIPTION MITIGANTS
KEY OPERATING RISKS
Decreased landings Fewer fishers participating in the In addition to the above, multiple cost
or leakage to other landing EM/ER project, resulting in lower recovery schemes are possible and would
centers landing volumes risk to cost prevent the success of the project being
recovery if performance-based overly reliant on catch volume.
charge system is adopted.
Technology or data After the project commences, Appropriate engagement with BFAR
standards rendered government may release new and WCPFC would enable setting the
irrelevant or obsolete by MCS technology requirements standards needed for Philippines MCS and
action of government or data reporting standards that reporting to RFMOs for foreseeable future.
do not match PPP technology A concession contract with government
choices. would identify a change in technology or
reporting standards as a change in law,
leading to a compensation event.
Technology choice does Technology needs replacement The technology choice will be made on
not hold up under actual due to failures. the basis of proven technologies.
fishing conditions
Fishers tamper with Fishers may be tempted to turn Experience in other global fisheries
instruments and input false off recording equipment, tamper indicates that tampering and false data
data with instruments, or input false input can be reduced through proper
data. technology selection and auditing
procedures. The technology choice will
be made on the basis of tamper-resistant
technology (including rare event alerts).
Portside enumerators face Enumerators may be unable Deployment of full-time security at port
threats/resistance to gather data freely due to would mitigate this.
security issues.
Vandalism and damage to Break-ins or other vandalism Back up all information onto cloud
data center damage to the data center is database. In addition, the data center
possible. can be made more secure by being
intentionally placed in the most secure
location in the port and with the
deployment of full-time security.
LEGAL RISK
Inconsistency with new Contents of forthcoming rules It is possible to restructure the project
rules on MCS for the Amended Fisheries Act to become compliant. A FIMS PPP
are unknownit is possible restructuring study may be required to
that a specific MCS regime reconsider the project structuring options.
has been mandated and that
the technology choice will be
predetermined, reducing project
flexibility and viability.
46
Deployment period for The FIMS PPP component of the During the feasibility study phase,
MCS compliance under new proposed strategy cannot meet the project can be sequenced such
regulations set by BFAR the governments need to deploy that the FIMS PPP activities begin
does not match project MCS. deployment earlier while the port is under
construction schedule construction, if necessary.
Also, in-depth engagement with BFAR
should be undertaken to get immediate
buy-in of the FIMS PPP concept that can
be used to pilot the MCS deployment.
APPENDIX
F inancial projections and returns analysis for Nexus Blue over the 3-year construction period and the first
10 years of the operating concession period:
FINANCIAL PROJECTIONS
Construction Period Operational - Under Concession
Const. Year 1 Const. Year 2 Const. Year 3 Op. Year 1 Op. Year 2 Op. Year 3 Op. Year 4 Op. Year 5 Op. Year 6 Op. Year 7 Op. Year 8 Op. Year 9 Op. Year 10
REVENUES
Market Rental $265,270 $274,756 $282,428 $301,813 $322,528 $344,664 $359,551 $375,080 $391,280 $402,207 $413,438 $424,984 $436,851
Freezer & Cold Storage 135,510 140,355 144,275 154,177 164,759 176,067 183,672 191,605 199,880 205,462 211,199 217,097 223,159
Agro-Industrial Commercial Rental 809,332 838,273 861,682 920,823 984,024 1,051,562 1,096,981 1,144,360 1,193,787 1,227,123 1,261,390 1,296,615 1,332,823
Port Usage Fee Revenue 2,690,997 2,787,225 2,865,059 3,207,497 3,590,864 4,020,052 4,500,537 5,038,452 5,384,265 5,753,813 6,148,725 6,414,296 6,691,337
Increased Throughput Fees 101,174 103,754 105,596 118,217 132,346 148,165 165,874 185,699 198,445 212,065 226,620 236,408 246,619
Solar Revenues 817,455 831,963 846,728 861,756 877,050 892,615 908,457 924,579 940,988 957,688
Local Business Tax Accrued & Paid (33,074) (34,246) (35,192) (45,595) (49,773) (54,400) (59,194) (64,506) (68,202) (71,905) (75,839) (78,681) (81,635)
Net Revenues 3,969,209 4,110,118 4,223,847 5,474,387 5,976,710 6,532,839 7,109,175 7,747,739 8,192,069 8,637,221 9,110,114 9,451,707 9,806,842
YoY Growth in Sales 9.2% 9.3% 8.8% 9.0% 5.7% 5.4% 5.5% 3.7% 3.8%
OPERATING EXPENSES
Port Operating Expenses 306,050 306,050 306,050 1,546,571 1,574,019 1,601,953 1,630,384 1,659,319 1,688,768 1,718,739 1,749,243 1,780,287 1,811,883
FIMS Operating Expenses - - - 718,795 731,551 744,535 757,748 771,196 784,883 798,813 812,990 827,418 842,103
Total Operating Expenses 306,050 306,050 306,050 2,265,365 2,305,570 2,346,488 2,388,132 2,430,516 2,473,651 2,517,552 2,562,232 2,607,705 2,653,986
EBITDA 3,663,160 3,804,069 3,917,798 3,209,022 3,671,140 4,186,351 4,721,043 5,317,224 5,718,418 6,119,669 6,547,881 6,844,001 7,152,857
EBITDA Margin 92.3% 92.6% 92.8% 58.6% 61.4% 64.1% 66.4% 68.6% 69.8% 70.9% 71.9% 72.4% 72.9%
Depreciation - - - 3,012,838 3,012,838 3,012,838 3,012,838 3,012,838 3,012,838 3,012,838 3,012,838 3,012,838 3,012,838
Operating Income (EBIT) 3,663,160 3,804,069 3,917,798 196,184 658,302 1,173,513 1,708,205 2,304,386 2,705,581 3,106,831 3,535,043 3,831,163 4,140,019
Interest - - - (2,602,309) (2,590,582) (2,558,346) (2,491,564) (2,386,684) (2,240,242) (2,067,298) (1,867,360) (1,651,984) (1,424,071)
EBT 3,663,160 3,804,069 3,917,798 (2,406,125) (1,932,279) (1,384,833) (783,359) (82,298) 465,338 1,039,533 1,667,683 2,179,179 2,715,948
Taxes (1,098,948) (1,141,221) (1,175,339) - - - - (46,088) (54,112) (62,137) (390,132) (699,841) (814,784)
Net Income 2,564,212 2,662,848 2,742,458 (2,406,125) (1,932,279) (1,384,833) (783,359) (128,386) 411,227 977,396 1,277,552 1,479,338 1,901,163
Dividends - - - - - - - - 117,419 230,363 256,846 258,251 2,198,056
CAPITAL EXPENDITURES
PortCo 11,570,653 11,865,754 12,076,341 - - - - - - - - - -
FIMSCo - - 2,448,081 - - - - - - - - - -
Total CAPEX 11,570,653 11,865,754 14,524,422 - - - - - - - - - -
FINANCING
SENIOR DEBT FINANCING
Beginning Debt Balance - - 4,965,406 15,157,022 15,034,648 14,677,287 13,933,815 12,766,838 11,140,193 9,116,173 6,686,328 4,042,053 1,232,966
Net Debt Issued / (Repaid) - 4,965,406 10,191,616 (122,375) (357,360) (743,472) (1,166,976) (1,626,645) (2,024,020) (2,429,845) (2,644,275) (2,809,087) (1,232,966)
Ending Debt Balance - 4,965,406 15,157,022 15,034,648 14,677,287 13,933,815 12,766,838 11,140,193 9,116,173 6,686,328 4,042,053 1,232,966 -
JUNIOR DEBT FINANCING (PROJECT SPONSOR)
Beginning Debt Balance - 5,983,470 8,885,773 9,596,635 9,945,584 10,231,441 10,394,442 10,419,221 10,290,590 10,149,827 9,997,804 9,833,618 9,656,298
Net Debt Issued / (Repaid) 5,983,470 2,902,303 710,862 348,949 285,857 163,001 24,780 (128,631) (140,763) (152,024) (164,186) (177,320) (191,506)
Ending Debt Balance 5,983,470 8,885,773 9,596,635 9,945,584 10,231,441 10,394,442 10,419,221 10,290,590 10,149,827 9,997,804 9,833,618 9,656,298 9,464,791
EQUITY FINANCING (PROJECT SPONSOR)

Beginning Equity Balance - 1,438,334 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936
Change in Equity 1,438,334 582,602 - - - - - - - - - - -
Ending Equity Balance 1,438,334 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936 2,020,936
VALUATION ANALYSIS
PROJECT FREE CASH FLOWS
Pre-Tax Project Free Cash Flow
(Unlevered ) (8,363,194) (8,077,909) (10,622,055) 3,295,122 3,613,652 4,123,690 4,653,103 5,243,067 5,668,500 6,071,829 6,492,517 6,807,143 7,114,414
After-Tax Project Free Cash Flow

(Unlevered ) (9,462,141) (9,219,130) (11,797,394) 3,295,122 3,613,652 4,123,690 4,653,103 5,204,566 5,621,975 6,017,279 6,429,403 6,738,106 6,703,764
47 CASH FLOWS TO SPONSORS W/O SUBSIDY
Blended Cash Flow to
Sponsors - w/o Subsidy (9,462,141) (3,499,285) - 279,764 509,790 655,515 806,776 964,337 1,083,596 1,196,540 1,314,290 1,402,491 1,392,679
Equity Cash Flow to

Sponsors - w/o Subsidy (1,892,428) (699,857) - - - - - - - - - - -
CASH FLOWS TO SPONSORS W/ SUBSIDY

Blended Cash Flow to
Sponsors - w/ Subsidy (7,191,671) (2,913,011) - 418,781 509,790 655,515 806,776 962,169 1,081,429 1,194,373 1,220,856 1,222,261 3,162,066
Equity Cash Flow to

Sponsors - w/ Subsidy (1,438,334) (582,602) - - - - - - 117,419 230,363 256,846 258,251 2,198,056
TOTAL PROJECT RETURNS

Project IRR (Pre-Tax) 17.3%
Project IRR (After-Tax) 15.1%
SPONSOR RETURNS W/O SUBSIDY

Sponsor Blended IRR 12.4%
Sponsor Equity IRR 17.2%
SPONSOR RETURNS W/ SUBSIDY
Sponsor Blended IRR 15.0%
Sponsor Equity IRR 22.3%

ANNEX A: THE PUBLIC-PRIVATE PARTNERSHIP FRAMEWORK
T he following section provides an overview of public-private partnerships for those without prior
knowledge of PPP framework and variations.
DEFINITION
While definitions and interpretations of public-private partnerships are varied, ranging from corporate
social responsibility initiatives to urban renewal projects, we conform here to the definition used by the
World Bank. It defines a PPP as a long-term contract between a private party and a government entity,
for providing a public asset or service, in which the private party bears significant risk and management
responsibility, and remuneration is linked to performance.
This definition reflects the investment-driven, return-seeking framework that many national governments
have adopted as a means to attract private capital, management skills, innovation, and efficiency in
developing, constructing, and operating public infrastructure and services.
Defining Characteristics of Successful Public-Private Partnerships
1. Binding legal contract between public and private sector
2. U
sed for the provision of public infrastructure or services on a project basis over a
medium to long-term time frame
3. P
rivate sector partner commits up-front capital investment and assumes associated development,
implementation, and operating risks
4. U
pon successful service delivery, the private party recovers investment via user fees or contracted
government payments at a level specified in the contract
5. Risk and cost are allocated to party best able to manage them
6. Private sector partner is able to deliver greater efficiency and value for the money
FIGURE 37: The Public-Private Partnership Spectrum

SPECTRUM OF PRIVATE SECTOR PARTICIPATION

IN INFRASTRUCTURE AND DEVELOPMENT PROJECTS
Public Owns Private Sector Owns

and and
Operates Assets Public/Private Partnership Operates Assets
48
Concessions
Utility Build-Operate-
Civil Works JointVentures
Restructuring Management Transfer
Leases/ (JV) / Partial Privatization /
Service & Operating (BOT)
Corporatization Affermage Divestiture of Full Divestiture
Contracts Contracts Design-Build- Public Assets
Decentralization Operate
(DBO)
LOW HIGH
Extent of Private Sector Participation
Source: Delmon, Jeffery (2010) Understanding Options for Public-Private Partnerships in Infrastructure, World Bank
PPP REVENUE MODELS
In exchange for financing, developing, and/or requirements defined in the contract, the private
operating a public asset or service on a contracted partner is entitled to compensation through one of
basis, as well as meeting the performance two structures (or in some cases a hybrid).
AVAILABILITY PAYMENTS
In an Availability PPP, the public partner pays in Availability PPPs bear the performance risk for
predetermined, contracted fees, called availability delivering the products or services at the agreed-
payments, to the private partner in exchange for upon quality and consistency, but do not typically
consistently providing the asset or service at the assume commercial market risk.60
agreed level of quality. As a result, private investors
CONCESSIONS
Under a Concession PPP, the government grants the life of the project. For this reason, Concession
the private sector the right to build, operate, PPPs are often granted for natural monopolies
and charge users of the public infrastructure or such as metro lines, where there are no direct
service, at a regulated fee, toll, or tariff, under the competitors to steal market share.
oversight of regulators and in accordance with
The form that a particular project PPP takes will
the concession agreement itself. Revenues are
largely depend on the type of project, the specific
structured to cover debt service, fixed operating
governments PPP protocols and preferences, the
costs, and enable an appropriate return on equity
level of project priority, the nature of the project
(often capped by the regulators).61 As there is no
risks, the social benefits of the project, and the
guarantee of payment under the concession, these
manner in which the project was solicited. In some
projects assume the risk that the asset or service
cases, a project may utilize a combination of
will be able to attract and maintain users over
concession and availability payments.
PROJECT DEVELOPMENT
Because of the high-profile and often politically of millions of dollars in high-risk development equity
sensitive nature of PPPs, governments work hard and/or public sector resources before a decision is
to ensure that projects are extremely well studied even made on whether a project can proceed.
and fully vetted before any commitments are
made. Public partners and other stakeholders want Only after the project has been officially awarded
to make sure that on the one hand, the project and contracts signed is the private sponsor in a
does not fail financially, requiring the public sector position to secure project debt and move ahead
to bail it out or leave a white elephant behind. with construction and/or implementation. Once
49
On the other hand, government officials want to the PPP is operational, sponsor risk is dramatically
ensure that returns are not so attractive at the reduced and the equity assumes a profile more
expense of either taxpayers or ratepayers that the akin to fixed income. The entire development
arrangement will become politically unpopular. process, from concept to operation, spans several
Therefore, the project development cycle is slow, years. Figure 38 lays out an indicative project
laborious, and costly, often requiring commitments development cycle.
60
While there are no usage fees in this type of project, an example is the PPP for School Infrastructure Project wherein the private sector is
responsible for making available classrooms (consisting of design, financing, construction, and maintenance) for a contract fee with the
Department of Education.
61
An example of a Concession PPP is the Ninoy Aquino International Airport (NAIA) Expressway wherein the Department of Public Works
and Highways (DPWH) granted the private sector the right to build and operate the expressway. Under the contract, the private sector
was given the right to collect a toll (user charge) from the users of the expressway.
FIGURE 38: Indicative PPP Project Development Cycle
Project
Project Proposal Tender /
Full Feasibility Contract Construction & Operations &
Identification & & Pre- Investor
Study Negotiation Implementation Monitoring
Screening Feasibility Selection
Study
PROJECT RISK
HIGH RISK LOW RISK

No proprietary assets Stable and predictable cash flows
No guarantee of financial feasibility Contracted assets
No guarantee of public-sector commitment Clear payback
Formal public-sector commitment
PPP PROJECT CHARACTERISTICS
Due to the development cycle, detailed feasibility The long asset lives involved, together with the
analysis, government vetting, and associated fundamental objective of the PPP construct to
cost of these activities, PPPs are typically only provide ongoing public goods and services, means
feasible for large, complex, capital-intensive that the contracts involved are usually quite
projects. Under PPP requirements defined by the long, often in excess of 20 years. As such, the
government facilitating authorities, a mandated investments are largely or entirely self-amortizing,
minimum investment size generally must be met and when there is a formal exit by way of a
before the government will even consider the compensated transfer back to the public sector,
proposal. While it depends on the project context this does not act as a meaningful driver of the
and geography, stakeholders on both the public overall return. This also means that PPPs are project
and the private side will often only take an interest investments with a defined project life established
in investments of over $100 million for traditional in the concession or availability contract.
infrastructure PPPs.
PPP STAKEHOLDERS
There are three categories of stakeholders in a expertise; and the financial sponsor(s) who
typical PPP: (1) Private Sponsor(s); (2) Government provide equity and pull together project financing.
Counterpart(s); and (3) Direct Beneficiaries/ However, these roles may also be filled by the
50
Ratepayers.62 On the private side, particularly in same party.
large, multifaceted complex PPPs, the contracting
party is often a consortium of complementary On the public side, the main counterpart is often
partners, each fulfilling a specific function. These the government agency responsible for the
roles include the original project developer(s) who category of goods or service being provided, also
identify the opportunity, undertake initial feasibility known as the implementing agency. For example,
work, and assemble the consortium; the project in a toll road PPP, the implementing agency may
operator(s) and/or asset manager(s) who provide be the Department of Transportation. Also on the
the project implementation and ongoing operating public side, there is usually a dedicated PPP unit
62
Where availability payments or government subsidies are utilized, taxpayers may be considered as a fourth stakeholder category.
responsible for promoting and managing the PPP Ministry of Finance or equivalent may also be
development process, including procurement, involved. Other relevant participants include
bidding, upholding the countrys PPP laws, and lenders, legal and financial advisors, consultants,
developing and implementing relevant policies. designers, and contractors.
Where government financing is required, the
PPP INVESTOR LANDSCAPE

Private equity investors in PPPs include the early- Global investor demand for infrastructure and
stage, high-risk development equity provided PPP investments has grown in recent years, driven
by the project developer(s), and the lower-risk, by a hunt for yield during a protracted period
later-stage project equity provided to fund the of low interest rates, and by increasing comfort
project company and initial capital requirements. with and access to the asset class. Infrastructure
This later-stage equity may be provided by the funds raised over $31 billion globally in 2014,
members of the private consortium themselves, and $21 billion was raised during the first half
or may be contributed by private or institutional of 2015. PPPs have been utilized for projects in
real asset equity investors via a dedicated financial defense, environmental protection, government
sponsor. While the development equity is high-risk buildings, hospitals, information technology,
venture investment with commensurate returns, the municipal services, prisons, recreation, schools,
project equity is akin to yield-based investments in solid waste, transport, tourism, and water. To date,
51 other real assets such as timber or Master-Limited no sustainable fisheries-focused public-private
Partnerships (MLPs), with predictable, inflation- partnership has been implemented.
hedged returns.
ANNEX B: PUBLIC-PRIVATE PARTNERSHIPS IN THE PHILIPPINES
I n cases where the public sector has limited experience, effectiveness, and ability to innovate around the
delivery and management of social goods, Public-Private Partnerships provide an opportunity to combine
the authority and oversight of the public sector with private sector project development and business
acumen. In emerging markets especially, the PPP structure has been widely adopted, as countries struggle
to close gaps in infrastructure and services for an increasingly mobile, urbanized population.
The Philippines pioneered the use of public-private partnerships in major government infrastructure
projects in Asia and has a strong regulatory framework that facilitates the development and approval
of projects. The PPP Build Operate Transfer (BOT) Law, or Republic Act (RA) 6957, passed in 1990, was
the first of its kind in the region. Faced with public-sector budget constraints and limited capacity, PPPs
have become a critical source of capital and of development and operating expertise for priority projects
including electricity, public transportation, water distribution, toll roads, airports, and container ports.63
Administered by the National Economic Development Corporation (NEDA), the Philippines BOT law
supports national growth and development by engaging the resources and capital of the private sector
to achieve the countrys priority development goals. The government may authorize a PPP for any sector,
including nontraditional areas such as information technology (IT), housing, tourism, education, and health,
as well as traditional sectors such as power plants, highways, ports, water supply, irrigation, reclamation,
government buildings, slaughterhouses, warehouses, public markets, solid waste, drainage, and other
projects that may be deemed appropriate.
PHILIPPINES PRECEDENT PROJECTS AND TRACK RECORD

Since its implementation in 1990, the Philippine BOT program has generated total private capital investment
in PPPs of over $25 billion. During the past 5 years, the government established the approach as a priority
pillar of economic growth and infrastructure development It has awarded 10 projects since 2010, and there
are currently 14 others in varying stages of procurement. Over the past year, the government awarded two
PPP contracts for transportation projects costing $1.3 billion, approved a railway PPP with an indicative cost
of $3.8 billion, rolled out a $1.5 billion port modernization project, and approved a transportation IT project
worth $6 million.64 In recognition of its regional leadership role in PPPs, the Philippines was awarded the
U.K.s award for Best Central/Regional Government PPP Promoter, won the IJGlobal award for Asia-Pacific
Grantor of the Year, and was recognized as the most improved country in the Asia Pacific region for Public-
Private Partnership readiness in a 2015 report commissioned by the Asian Development Bank.
PPP ROUTE OPTIONS AND COMPARISONS

Depending on the nature of the project and the entity leading the development of the PPP, there are
three core route options that developers and government agencies can follow. The most common path
52 is for governments to initiate projects as a solicited PPP, which they first study and approve, and then
put through a bidding process for interested private-sector consortia. As projects are put forth by the
government, incentives such as guarantees and availability revenues are often available, whereby the
government will directly pay the private partner for developing assets and providing services. However,
solicited projects are subject to extensive private-sector competition, and development periods can be
especially long and unpredictable, often spanning several years.
63
Public-Private Partnerships: A Practical Guide for Business, Zambrano and Gruba Law Offices.
64
PPP Talk JanuaryJune 2015.
In contrast, the unsolicited PPP route allows and opportunities for government subsidies and
a private developer to conceive of and develop availability payments are very limited. In addition,
a specific project proposal based on NEDAs the project proponent must invest significant
economic development priorities, which it submits capital to develop the project, and there is no
to NEDA for review and consider whether or not guarantee that the proposal will be accepted by
to accept. Upon acceptance, the government NEDA, and competition for the project remains in
publicizes the proposal and puts out a limited the form of the abbreviated bidding process.
competitive process in the format of a Swiss
Auction. This allows other interested developers The newest structure option, established by NEDA
to put in a bid on the project during a 90-day in 2013, is the Joint-Venture (JV) PPP route, in
window, and the competing proposal(s) are then which a government corporation may enter into
weighed against the original project proponents either an equity or a contractual joint venture
proposal before a decision is made on which arrangement with the private sector to co-invest
group to award the contract to. If no other groups in the assets or services provided for public
bid during a period of 90 days, the project is benefit. Unlike the other arrangements, where
automatically awarded to the original proponent. the government assigns a formal concession and
monitors performance but otherwise has no direct
The unsolicited process is streamlined, allowing participation, the JV route provides for a more
the private project developer to more fully control fulsome government role.
the process and timing and tailor the proposal to
their vision and strengths. Though faster and more Figure 39 identifies the main pros, cons, and
efficient for the private sector, NEDA is very strict mitigation steps to each pathway as applied to
about the requirements for project acceptance, the project.
Figure 39: Pros and Cons of the Three PPP Pathway Options
ROUTE PROS CONS MITIGATION
Solicited Permits Government Unpredictable development Garner full government

PPP subsidization and period stakeholder buy-in from
guarantees BFAR, BAS, NEDA,
Will require significant and PFDA to fast track
Payment structure could investment to assist project
include availability based Government to get project

payments if budget is on priority list Garner government
available stakeholder support of
Availability payment budget allocation for
Investment incentives may subject to willingness of availability payment
be available implementing agency to
allocate funds over the Align best participants
Funds from project long term and lenders early on
development facility may to reduce strength of
53 be available for project Subject to competition after competitors
development costs project is listed
Hold back a few
innovations to surprise
evaluators during bidding
ROUTE PROS CONS MITIGATION
Unsolicited Private sector may propose No government subsidy or Structure project with
PPP guarantee (i.e., no Viability sufficient revenue to not
Payment structure could Gap Funding [VGF] require subsidy
include availability-based support), which could
payments if budget is provide a challenge to Garner government
available financing stakeholder support of
budget allocation for
Process has averaged 1415 No funds from project availability payment
months after approval of development facility
project proposal65 are available for project Find aid funding for
development costs components of project
requiring subsidy or
Access to investment support
incentives is ambiguous, a
project is not prioritized
Unpredictable
development period
Will require proponent

to bear full project
development until tender
Availability payment
subject to willingness of
implementing agency to
allocate funds over the
long term; often difficult
to obtain
Subject to competition in
the end
Joint Private sector may propose Unpredictable Garner full government

Venture development period stakeholder buy-in from
Possibility for direct BFAR, BAS, NEDA, and
negotiation Subject to competition in PFDA to fast
the end track project
Subsidy permitted on
approval of budget No funds from project

development facility
Theoretically shorter are available for project
development period development costs
Largely untested and would

require significant support
of government to progress
May not be fully replicable

54 in other countries where
JV-type partnerships are not
permitted
65
GHD Pty. Ltd., comp. Policy Brief Unsolicited Proposals (2012): n. pag. Web.
ANNEX C: PROPOSED INVESTMENT
DESIGN METHODOLOGY FOR FISHERIES PPPS
THE PPP INVESTMENT BLUEPRINT DEVELOPMENT PROCESS

Due to the unique structure and needs of the PPP framework, Encourage Capital undertook a 12-step
PPP blueprint development process, split between a five-step project scoping exercise and a seven-step
project pre-feasibility study. The full process required engaging in dialogue with a wide range of fisheries
stakeholders, advisors, and consultants to develop and evaluate the challenges, opportunities, risks, and
legal viability of a fisheries PPP strategy as profiled within the national-scale Investment Blueprint. To
identify potential projects and evaluate their viability, Encourage Capitals 12-step review process sought to
determine whether the project attributes conformed with the requirements of local PPP law, including the
identification of a financially viable revenue model, while achieving national-scale (as well as regional-scale)
management reform objectives with outsized impact.
PROJECT SCOPING EXERCISE
The objective of the project scoping activity was to refine the goals of a potential Sustainable Fisheries
Public-Private Partnership and to narrow the project alternatives for further technical evaluation. Scoping
activities are summarized in the Figure 40 below:
FIGURE 40: The Five Steps Undertaken During the Project Scoping Exercise
OBJECTIVE ACTIVITIES
Stakeholder Analysis Interviews with government officials including DA, BFAR, NEDA, NSAP, LGUs,
the PFDA, and others
Interview local and international NGO leaders
Interview industry participants including port personnel, vessel operators and
fishers, seafood companies, and others
Initial Fisheries Develop profile of international, national, and local fisheries

Assessment laws and requirements
Assess current fisheries management systems and processes, particularly

focused on stock assessments, data capture, monitoring, and traceability
Evaluate candidate fisheries status and condition, with consideration of the
fishery size and whether revenues are large enough to could justify costs
Preliminary Regulatory Evaluate the various PPP structuring options accepted by the government and
Analysis requirements for each option
Identification of highest Narrow the list of potential management needs only the most critical, and
impact Intervention those which the private sector would be uniquely suited to address
55 Undertake root cause analysis to identify the most impactful interventions
Evaluation of Revenue Evaluate the various alternatives for revenue generation to support the project,
Potential including seafood processing, port facilities, and transport options
PRE-FEASIBILITY STUDY
The objective of this phase was to conduct a or identify fatal flaws before committing to the
Preliminary Feasibility Study (PFS) of the identified high cost of a full Technical Feasibility Study. PFS
strategy for inclusion in a potential PPP proposal. activities are summarized in Figure 41:
The PFS is a precursor to a full detailed Technical
Feasibility Analysis to inform further development
FIGURE 41: The Seven Steps Undertaken During the Pre-Feasibility Study
OBJECTIVE ACTIVITIES
Initial Screen to Establish Put selected strategy through a Multi-Criteria Analysis (MCA) screen to identify
Suitability of Selected any fatal flaws before undertaking full Pre-feasibility study
Project Is it strategic for the government? Is it of sufficient scale? Does it appear to
have strong public support? Are there any major social safeguard concerns,
such as mass relocation requirements, that cannot be easily mitigated? Does
the project have a clearly defined objective and output specifications?
Analysis of Current This review included combination of desktop research, stakeholder consultation
Situation and government documentation in order to answer the following key questions:
What are the key challenges and opportunities?
What are the fundamental needs and business case for a viable PPP proposal?
What are key datapoints and metrics under the business as usual case?
Initial Financial Screen Perform high-level cost / revenue analysis to justify continued pursuit of the
identified project; used as a as an initial sanity check
Collection of Cost and Gather formal cost and revenue data to feed into financial model
Revenue Data
Detailed Financial and Input assumptions into a detailed project finance model to project financial
Social Cost-Benefit returns to the overall project and equity investors
Analysis Run a social cost-benefit analysis, including returns to investors as well as
quantifiable social benefits accruing to non-investors
Determination of the Identify the most promising PPP route option

Appropriate Route The two primary route options are the unsolicited proposal and a solicited
Option approach, though there may be others depending on the jurisdiction
Environmental and Social Undertake a preliminary environmental and social impact assessment for the
Impact Assessment preferred option to identify any negative impacts and potential mitigants
56
PROJECT CONSTRAINTS
Three sets of constraints bound this analysis, impact that Encourage Capital identified to support
covering external requirements demanded by the the projects fundamental theory of change and
countrys PPP regulatory framework, bankability, and ability to scale. The three primary constraints that we
the requirements for positive fisheries management adhered to were the following:
ADHERE TO THE PHILIPPINES PPP REGULATIONS AND PROJECT FINANCING REQUIREMENTS
The most fundamental requirement for a sustainable that the project meets the national priorities and
fisheries PPP is that it adheres to the national PPP fits within the legal and institutional framework,
framework and laws. While these requirements vary and is of sufficient scale and bankability to ensure
by jurisdiction, they are all concerned with ensuring consideration.
DELIVER A COMPELLING VALUE PROPOSITION TO CRITICAL STAKEHOLDERS

Even the least controversial PPPs are often opposed and the right political allies. It is therefore critical
on political or social grounds, and are highly to identify the primary stakeholders most likely
scrutinized by elected officials and key stakeholders. to oppose the project, and then to offer these
Even well designed projects are destined to fail groups a compelling value proposition within the
without an effective communications strategy project proposal.
57 BE SCALABLE AND REPLICABLE IN ORDER TO ACHIEVE ECOSYSTEM-WIDE IMPACT

Part of the rationale in using a PPP approach to challenges investment models must be replicable
fisheries management is the ability for PPPs to and highly scalable not only within a particular
catalyze significant amounts of capital to address country but also across entire regions. Highly
large national or supranational public needs. The migratory fisheries resources fit this profile, as the
scale of fisheries management challenges requires sustainability of the resource is only as strong as the
large amounts of capital. Ecosystems dont adhere weakest link in the governance chain.
to state boundaries, so to address ecosystem-wide
ANNEX D: THE NATIONAL-SCALE FISHERIES INVESTMENT PROFILE
CORE VALUE DRIVERS

Despite their complexity, time and cost to develop, and the lack of specific sustainable fisheries
precedents, public-private partnerships for national fisheries management can offer a number of benefits
to governments and end users when appropriately structured the provision of public infrastructure, goods
and services. Encourage Capital has identified several key value drivers that support a PPP-based
national-scale fisheries impact investment strategy, including:
1. The infusion of private sector technologies, innovation, and expertise to provide higher quality, lower
cost public services
2. The incentives to hold the private sector accountable for delivering projects on time and
within budget
3. Greater budgetary certainty and visibility by identifying present and future infrastructure costs
4. Building of local capacity and transfer of technology through joint ventures and sub-contracts with
large international firms
5. Diversification of the regional economy and increased competitiveness resulting from improved fish
port landing and post-harvest infrastructure in conjunction with streamlined, cost effective fisheries
management tools
6. Supplementing limited public sector capacity and expertise in order to meet growing infrastructure
and information technology demands
7. Creating long-term value-for-money for the government partner through appropriate risk transfer
to private sector experts best positioned to assume it at a lower cost
RISKS TO CONSIDER
Because of the size and scope of the Nexus Blue Strategy, there is a wide spectrum of risk involved in the
execution and operations of the proposed PPP. Cooperation between private and government entities is
a critical element of this strategy, and constitutes an additional set of risks as well. Risks to the successful
implementation of the Nexus Blue strategy include (but are not limited to) the following:
Government entities may not act favorably toward the strategy, or may support an incompatible
approach to MCS that renders a FIMS infrastructure component irrelevant.
Local fishers and vessel operators may reject infrastructure changes or refuse to comply with proposed
management solutions.
The project may not be approved or may need to be extensively modified after a formal feasibility study
is conducted.
58
A heavy reliance on field deployment of potentially fragile monitoring and communications technology
may expose the strategy to a risk of various technology failures.
The Port facility currently has some security concerns that could manifest as vandalism risks, or risks to
data infrastructure or personnel.
STRUCTURE AND TERMS
Although the specific structure and terms may issue debt backed by the projects assets and cash
vary by jurisdiction and project characteristics, a flows, with no recourse to the partners behind the
fisheries PPP will generally adhere to a standard project company. The optimal capital structure will
project finance structure, in which equity is invested depend on a range of factors including the revenue
alongside non-recourse project debt supported type (concession vs. availability), project risks, credit
by the stable, predictable cash flows required of of the public sector counterpart, but debt to equity
a viable project. Because the structure is defined ratios are rarely less than 1:1 and more commonly lie
under the national PPP framework, it tends to be in the range of 70:30 to 80:20 (i.e., leverage ratios
very standardized and must be acceptable to a wide of 3.0x to 4.0x).66
range of potential bidders. (see Figure 42).
PPP contracts are very long-term investments,
With long and bounded time horizons, contracted with periods of up to 50 years in extreme cases.
returns, a hard asset base, and project-specific Investors must therefore have a long-term time
investment, PPPs tend to be project financed with horizon, and for this reason pension funds,
high levels of non-recourse project debt. In this endowments, and insurance companies are often
model, a project company will be established as a investors, as they can match their long-term
special purpose vehicle (SPV), funded with equity liabilities and outlook with a yield-based asset.
from the private-sector partners, which would then
FIGURE 42: Indicative Public-Private Partnership Transaction Structure
FINANCIAL SPONSORS PUBLIC SECTOR SPONSOR

(consortium)
Impact Local Project Intl Project Implementing Ministry of

NEDA
Investors Developers Developers Agency Finance
Common Dividends Common Equity Revenue Sharing*

Hybrid Equity Project Asset Ownership at End
Preferred Dividends
Mezzanine Debt Concession of Concession Term
Junior Debt Service
SENIOR DEBT
PROJECT COMPANY (SPV) GUARANTORS
PROVIDERS Senior Project Project Debt
Debt Guaranty
Commercial
Lenders DFIs
DFIs Concessionaire
National
Financial Senior Debt Guaranty Fee Government
Institutions Service
Investment to Build,
Operate & Maintain User Fee & Rental
Facilities Revenue
59
FACILITIES
Facility Infrastructure & Operations
66
Asian Development Bank, Credit Rating Methods for Public-Private Partnership Infrastructure Projects and Small and Medium-Sized
Enterprises in South Asia, 2014.
With support from:
Bloomberg Philanthropies
Vibrant Oceans Initiative
The Rockefeller Foundation

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INVESTING

With support from:

NATIONAL-SCALE FISHERY CHALLENGES

The Nexus Blue Strategy: A National-Scale Fisheries Investment in the Philippines 1

Profile of the Nexus Blue Strategy Fishery 4

General Santos Fish Port Complex 16

The Nexus Blue Impact Strategy 27

The Nexus Blue Strategy Financial Assumptions and Drivers 37

The Nexus Blue Transaction Structure 40

Analysis of Financial Returns 42

Nexus Blue Risks and Mitigants 45

Annex A: The Public-Private Partnership Framework 48

Annex B: Public-Private Partnerships in the Philippines 52

Annex C: Proposed Investment Design Methodology for Fisheries PPPs 55

Annex D: The National-Scale Fisheries Investment Profile 58

FIGURE 1: Philippines Fisheries Snapshot 4

FIGURE 2: The Tuna Highway and WCPFC Statistical Area 6

FIGURE 3: WCPFC Tuna Species Landed in the Philippines 6

FIGURE 4: WCPFC Billfish Species Landed in the Philippines 7

FIGURE 5: Relative Size of the WCPFC Tuna Fisheries 7

FIGURE 6: The Status of Key Tuna Stocks in the WCPO 8

FIGURE 8: Stock Status of Selected Global Tuna Fisheries as of 2014 9

FIGURE 9: Classification of Philippine Registered Commercial Vessels of the WCPFC 10

FIGURE 11: Fisheries Governance Index 13

FIGURE 13: Map of the Philippines and General Santos City 16

FIGURE 17: Frozen Fish Landings into General Santos (20042014) 20

FIGURE 18: On-the-Water Logistics and Transport 21

FIGURE 19: General Santos Fish Port Current Facilities 22

FIGURE 20: Comparison Between Municipal and Industrial Sectors 26

FIGURE 21: The Nexus Blue Strategys Investments 28

FIGURE 24: Port-Based Electronic Catch Accounting and Data Management 32

FIGURE 25: FIMS Capex Budget by Category 33

FIGURE 29: Port Infrastructure Capital Expenditures 36

FIGURE 31: NexusCo Revenues by Category Over 33-Year Project Life 38

FIGURE 34: Sources and Uses of Funds 40

FIGURE 35: Nexus Blue Public-Private Partnership Transaction Structure 41

FIGURE 36: Summary of Returns 43

FIGURE 37: The Public-Private Partnership Spectrum 48

FIGURE 38: Indicative PPP Project Development Cycle 50

FIGURE 42: Indicative Public-Private Partnership Transaction Structure 59

Bigeye Tuna Black Marlin Yellowfin Tuna

Skipjack Albacore Frigate Tuna

management reform, compliance with international of Philippine fisheries authorities to complete

KEY VALUE DRIVERS

FIGURE 1: Philippines Fisheries Snapshot

7,107 islands Exclusive Economic Zone:

36,289 km coastline 2,265,684 km2

2012 fisheries production:

4 1 million registered fisherfolk 41%

STOCK PROFILE AND CURRENT STATUS

FIGURE 3: WCPFC Tuna Species Landed in the Philippines

Yellowfin Tuna Bigeye Tuna

Frigate Tuna Albacore Skipjack

Striped Marlin Swordfish

Blue Marlin Black Marlin

WCPFC STOCK STATUS

FIGURE 5: Relative Size of the WCPFC Tuna Fisheries

WESTERN PACIFIC OCEAN IN CONTEXT Key Facts:

Indian Kirbati Eastern Indonesia Atlantic Papua

Source: SPC (Secretariat of the Pacific Community), 2015.

FIGURE 6: The Status of Key Tuna Stocks in the WCPO16

STATUS OF KEY TUNA STOCKS

Source: SPC (Secretariat of the Pacific Community), 2015.

FIGURE 3: WCPFC Tuna Species Landed in the Philippines 6

FIGURE 4: WCPFC Billfish Species Landed in the Philippines 7

FIGURE 5: Relative Size of the WCPFC Tuna Fisheries 7

FIGURE 11: Fisheries Governance Index 13

FIGURE 17: Frozen Fish Landings into General Santos (20042014) 20